Question 1

Money serves as a store of value when it

Accepted Answer

A store of value is something that holds its value over time, allowing people to save for future purchases. Money can serve as a store of value when its purchasing power remains relatively stable and consistent over time, meaning that it can be used to purchase approximately the same amount of goods over time. Choices A, B, D, and E do not accurately describe a store of value.

Question 2

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

Accepted Answer

Money eliminated the need for the double coincidence of wants by serving as a medium of exchange, allowing individuals to trade goods and services for money rather than having to find someone who wants what they have and has what they want. Fiat money refers to money that is not backed by a physical commodity like gold or silver. A unit of account refers to the function of money that allows for easy comparison of the value of goods and services. A store of value refers to the function of money that allows individuals to save money for future purchases. Currency refers to the physical form that money takes, such as coins or paper bills.

Question 3

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 being used as a standard to measure and record the value of the day's catch. Therefore, abalones are serving as a unit of account.

Question 4

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 the flowers for his girlfriend.

Question 5

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

The situation described is an example of the double coincidence of wants not being satisfied. This means that both parties in a transaction must want what the other party has in order for a trade to occur. In this case, Gina's neighbor wants tutoring services for his children's British accent, but Gina does not want or need those services. Similarly, Gina wants her lawn mowed, but her neighbor does not want to do that task for her. Therefore, there is no basis for an exchange to take place, and the double coincidence of wants is not satisfied. None of the other answer choices accurately describe the situation.

Question 6

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

Accepted Answer

When money acts as a unit of account, it provides a common measure of the value of goods and services. This allows for precise comparison and calculation of prices, facilitating transactions and efficient exchange.

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 money is acting as a medium of exchange, it

Accepted Answer

Money acting as a medium of exchange allows for efficient exchanges as it eliminates the need for bartering and the double coincidence of wants. It facilitates transactions by creating a common unit of exchange which is widely accepted. Options A and B are irrelevant to the concept of money as a medium of exchange. Option C is more related to money functioning as a unit of account. Option E is directly opposite to what money as a medium of exchange aims to achieve.

Question 9

For something to be considered money, it must

Accepted Answer

For something to be considered money, it must be generally accepted as a medium of exchange. This means that people are willing to accept it in exchange for goods and services. The value of money can vary, but it is not necessarily tied to its intrinsic value or the backing of the government.

Question 10

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

Accepted Answer

Fiat money is not backed by anything of intrinsic value, which means it only has value because the government says it does. This is in contrast to commodity money, which is based on the value of some tangible commodity like gold or silver. Therefore, option E is not a characteristic of fiat money.

Question 11

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 12

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

Accepted Answer

By putting cash under their mattress, the individual is using money as a store of value, meaning they are holding onto it for future use or emergencies.

Question 13

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

Accepted Answer

When the government prints more money, the total supply of money increases without a corresponding increase in the amount of goods and services produced in the economy. This can cause prices to rise, leading to inflation.

Question 14

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 individual wants to buy tires using seashells, but not all merchants accept seashells as a form of payment. Therefore, there is no double coincidence of wants, as the merchant may not want or need seashells at the time.

Question 15

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 is because the value of goods can be expressed and compared in terms of the same unit of currency.

Question 16

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, money is being used as a unit of account, which is one of the functions of money. This means that money serves as a common measure of the value of goods and services being exchanged, allowing for easy comparison of prices between different products.

Question 17

Which of the following statements is true?

Accepted Answer

A commodity money is a type of money that is created by the market, not the government. It is backed by a physical commodity such as gold, silver or tobacco. A commodity-backed money is similar, but it is not necessarily backed by a physical commodity. Fiat money, on the other hand, is money that is declared legal tender by a government, but is not backed by a physical commodity. Therefore, option B is the only true statement.

Question 18

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

Accepted Answer

When Sally pays her cell phone bill with cash, the function of money that is highlighted is medium of exchange. Money serves as a medium of exchange in transactions where goods and services are exchanged for money. In this scenario, the cash serves as a means of exchanging value for the service provided by the cell phone company.

Question 19

Money does NOT function as a(n)

Accepted Answer

Money is not an item to barter, as bartering involves exchanging goods or services directly without the use of a medium of exchange. Money serves as a universal medium of exchange that facilitates trade and commerce, unit of account for measuring economic transactions, means to buy goods and services, and store of value for future transactions.

Question 20

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

Accepted Answer

The double coincidence of wants, where both parties have something the other wants, is a major obstacle in the barter system. This infrequently occurs and makes the barter method of exchange inefficient and difficult to execute on a large scale, which is why it's not more common in the U.S. economy.

Quiz 17: Money and the Federal Reserve