Question 1

Money serves as a store of value when it

Accepted Answer

Money serves as a store of value when it can be used to purchase approximately the same amount of goods over time. If money constantly loses its value over time, it would not be a reliable store of value. Similarly, if money experiences rapid fluctuations in value, it would also not be a reliable store of value. A reliable store of value allows individuals to save money and they can be confident that the value of their savings will not significantly decrease over time.

Question 2

A major advantage of money over barter is that it is

Accepted Answer

Money serves as a medium of exchange, allowing individuals to trade goods and services without having to engage in the time-consuming and inefficient process of bartering. This makes transactions much easier and quicker to complete, which in turn promotes more trade and economic activity. Money can also serve as a unit of account, a store of value, and a standard of deferred payment, making it a more versatile and useful economic tool than bartering.

Question 3

What function of money is highlighted when the price of one product is compared to another?

Accepted Answer

When the price of one product is compared to another, the function of money being highlighted is its role as a unit of account. Money serves as a common unit of measurement for the value of goods and services, allowing for easy comparison between different products.

Question 4

Money does NOT function as an)

Accepted Answer

Money is not an item to be bartered, as it is a universally accepted medium of exchange.

Question 5

The barter method of exchange isn't more common in the U.S. economy because the

Accepted Answer

The double coincidence of wants, where two individuals each have something the other wants, is a basic requirement for barter to occur. However, it is not easy for individuals to consistently arrange such trades in a complex economy with a large number of goods and services. Therefore, the frequency of the double coincidence of wants is relatively low, making barter impractical and uncommon, which is why the barter method of exchange isn't more common in the U.S. economy.

Question 6

In economic terms, how would Gina state what has happened when her neighbor says he is unwilling to help her mow her lawn because Gina is unwilling to help him teach his kids how to speak with a British accent?

Accepted Answer

This refers to the concept of the "double coincidence of wants" in barter transactions. In this case, Gina and her neighbor have different wants that they are offering in exchange (lawn mowing vs. accent tutoring), and there is no overlap or "coincidence" of wants that would allow for a trade to take place.

Question 7

Which of the following would be a consequence in an economy where there is no money?

Accepted Answer

The answer of Which of the following would be a...

Question 8

When a fisherman records the value of a day's catch in terms of an equivalent number of abalones, abalones serve as

Accepted Answer

Abalones are serving as a unit of account because the fisherman is measuring the value of their catch in terms of an equivalent number of abalones. They are not being used as a medium of exchange, fiat money, store of value, or currency.

Question 9

Money serves as a unit of account when goods

Accepted Answer

Money serves as a unit of account when goods have a value expressed in the same currency, thus allowing comparisons. This means that the value of different goods can be quantified in terms of the same unit (currency), making it easier to compare prices and make transactions.

Question 10

Which of the following statements is true?

Accepted Answer

A commodity money is a type of money that has an intrinsic value derived from a commodity, such as gold or silver. However, commodity money comes into existence through private decisions, not government decisions. Fiat money, on the other hand, has no intrinsic value and is declared by the government to be legal tender.

Question 11

What function of money is highlighted when Sally pays her cell phone bill with cash?

Accepted Answer

By using cash to pay her cell phone bill, Sally is using money as a medium of exchange to facilitate the transaction.

Question 12

For something to be considered money, it must

Accepted Answer

For something to be considered as money, it must be generally accepted as a medium of exchange by the people. While intrinsic value and backing from government can contribute to its acceptance, they are not necessary conditions for something to be considered money.

Question 13

When money is acting as a unit of account, it allows someone to

Accepted Answer

When money is acting as a unit of account, it allows someone to measure the value of goods precisely. This means that prices for goods and services can be accurately compared and calculated, which makes it easier to make informed economic decisions.

Question 14

What function of money is highlighted when Roland buys flowers for his girlfriend for their eight-day anniversary?

Accepted Answer

Roland is using money as a medium of exchange to purchase flowers for his girlfriend. He is exchanging money for goods and services to fulfill his personal needs and desires.

Question 15

Which of the following events could cause inflation in the United States-a country that uses fiat money?

Accepted Answer

Printing more money leads to an increase in the money supply, which can lead to inflation.

Question 16

When money is acting as a medium of exchange, it

Accepted Answer

Money acts as a medium of exchange by facilitating transactions and making exchanges more efficient. It eliminates the need for bartering, where individuals need to find someone with the exact good they want and exchange goods of equal value. Instead, they can use money to easily trade with others, making transactions quicker and more efficient.

Question 17

Money eliminated the need for the double coincidence of wants through its role as

Accepted Answer

Money serves as a medium of exchange, allowing individuals to trade goods and services without requiring the double coincidence of wants. This means that individuals can acquire the goods and services they need using money, without having to find another individual who wants exactly what they have to offer in exchange.

Question 18

Which of the following is an example of barter where the double coincidence of wants may not always occur?

Accepted Answer

In this scenario, the double coincidence of wants may not occur because not all merchants may be willing to accept seashells as a form of payment. This makes it difficult for the individual to find a merchant who is willing to accept seashells in exchange for tires.

Question 19

Which of the following is NOT a characteristic of fiat money?

Accepted Answer

Fiat money is not typically backed by anything of high intrinsic value, which distinguishes it from commodity money, which is backed by a physical commodity such as gold or silver.

Question 20

What function of money is highlighted if someone puts cash under his or her mattress to have on hand for unexpected emergencies?

Accepted Answer

The function of money highlighted here is store of value, as cash is being stored for future use in case of emergencies.

Quiz 17: Money and the Federal Reserve