Joan begins the month with $100 in her checking account. When she receives a paycheck for $1,200 on the 5th of the month, she puts $1,080 in her checking account and $120 in her savings account. During the month, she spends $550 on rent and utilities, $30 on household items, $10 on a T-shirt, and $350 on food, leaving a balance of $240 in her checking account. Based on the given information, which statement is NOT true?
A) The $120 in savings is primarily functioning as a store of value.
B) The $940 of purchases represents money functioning as a medium of exchange.
C) The $10 price tag on the T-shirt is an example of money as a unit of account.
D) After Joan deposits her paycheck (before any expenditures), her accounts contribute $1,300 to M1.

Question

Quizplus · Accepted Answer

- A) The $120 in savings is indeed functioning as a store of value, as it is being saved rather than spent immediately.- B) The $940 of purchases (total spending on rent, utilities, household items, a T-shirt, and food) indeed represents money functioning as a medium of exchange, as it is being used to facilitate transactions.- C) The $10 price tag on the T-shirt is an example of money as a unit of account, as it provides a way to compare the value of goods and services.- D) After Joan deposits her paycheck and before any expenditures, her checking account would have $1,180 ($100 initial balance + $1,080 from the paycheck), not $1,300. The $120 in the savings account does not contribute to M1, which consists of currency in circulation and checkable deposits.

Joan Begins the Month with $100 in Her Checking Account