Question 1

The use of a dollar bill to buy a concert ticket represents the function of money as a:

Accepted Answer

The use of a dollar bill to buy a concert ticket represents the exchange of money for a good or service. Therefore, the dollar bill is serving as a medium of exchange. While money can also serve as a unit of account and a store of value, these functions are not represented directly by the act of using a dollar bill to buy a concert ticket.

Question 2

Which of the following defines the "medium of exchange" function of money?

Accepted Answer

The "medium of exchange" function of money refers to its ability to be widely accepted in exchange for goods and services. This means that people are willing to accept money in exchange for what they are selling, which makes it easier for people to buy and sell goods and services.

Question 3

In order for barter to occur,traders must have a:

Accepted Answer

Barter is a system of exchange where goods or services are exchanged for other goods or services without the use of money. In order for a barter to occur, the traders must have a coincidence of wants, which means they must want what the other has to offer. They do not need a unit of account, medium of exchange, or central banking facility because they are not using money in the transaction.

Question 4

Are outstanding credit card balances counted as part of the money supply?

Accepted Answer

Credit card balances represent a liability, not an asset, as they have to be paid back to the credit card company. Therefore, outstanding credit card balances are not counted as part of the money supply.

Question 5

Comparing how many dollars it takes you to run your car each year to annual earnings on a job instead of keeping track of costs in terms of gallons of gasoline and quarts of oil represents the use of money as a:

Accepted Answer

Using money as a unit of account means measuring the value and costs of goods and services in terms of a common monetary unit, such as dollars. Comparing the cost of running a car to a salary in dollars represents the use of money as a unit of account.

Question 6

Which of the following provides the best explanation of why money is valuable?

Accepted Answer

Money is valuable because it is scarce. Money has value because people believe it does and are willing to exchange goods and services for it. The limited supply of money in circulation creates scarcity, which drives its value.

Question 7

A direct exchange of fish for corn is an example of:

Accepted Answer

Barter is the direct exchange of goods or services for other goods or services, without the use of money. Fish for corn is an example of barter.

Question 8

Fiat money is money:

Accepted Answer

Fiat money is money that is accepted by law as a medium of exchange, even though it has no intrinsic value. This means that its value is not based on any physical commodity, but rather on the trust and confidence that people have in the currency and the government that issues it. Examples include the US dollar and the euro.

Question 9

A barter economy is one in which:

Accepted Answer

In a barter economy, there is no use of money as a medium of exchange. Instead, people directly trade goods for other goods.

Question 10

For barter exchange to take place,

Accepted Answer

Barter exchange requires a coincidence of wants because each party must want what the other is offering in order for the trade to be mutually beneficial. Without this coincidence of wants, the trade cannot take place. The other options are incorrect as barter does not require products to be divisible, money, a single coincidence of wants, or gold to be traded.

Question 11

Buying a cup of coffee with a dollar bill represents the use of money as a:

Accepted Answer

When using a dollar bill to purchase a cup of coffee, it is being used as a medium of exchange, as it facilitates the exchange of goods and services. While money can also serve as a unit of account and a store of value, in this scenario, it is primarily functioning as a medium of exchange.

Question 12

In the United States,the purchasing power of money is determined by:

Accepted Answer

The purchasing power of money in the United States is determined by its acceptability. This means that people have confidence in the value of the currency and are willing to use it in transactions. The value of the underlying assets or the control of Congress over the money supply can affect the value of money, but ultimately, it is the acceptability of the currency that determines its purchasing power.

Question 13

Compared to a barter economy,using money increases efficiency by reducing:

Accepted Answer

In a barter economy, transaction costs can be high as individuals need to search for others who have the goods they want and are willing to trade for the goods they have. Money simplifies this process by acting as a universally accepted medium of exchange, reducing transaction costs and increasing efficiency. Money also does not necessarily reduce the need to specialize or prevent inflation, so B, C, and D are not the best choices.

Question 14

Which of the following defines the "store of value" function of money?

Accepted Answer

The "store of value" function of money refers to its ability to hold value over time. This means that it can be saved or stored for future use without losing its value.

Question 15

The exchange of one good for another,without the use of money,is known as:

Accepted Answer

Barter refers to the direct exchange of goods or services without the involvement of money. It was a common form of trade in ancient times, and is still used in some parts of the world today.

Question 16

Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a:

Accepted Answer

The comparison of college costs to job earnings is using money as a unit of account, as it is being used as a standard measure to assess the value of two different things.

Question 17

Which of the following defines the "unit of account" function of money?

Accepted Answer

The "unit of account" function of money refers to its ability to serve as a common measurement of the relative value of different goods and services. This means that prices can be expressed in terms of a single unit, allowing for easier comparison and exchange.

Question 18

Barter requires:

Accepted Answer

Barter requires a coincidence of wants, which means that both parties need to want what the other is offering in order for the exchange to occur. Portability and durability of the goods may be helpful, but they are not essential for barter. Divisibility of the exchange medium is also not a requirement, as barter can occur without a standard medium of exchange. An effective middleman is also not necessary for barter, although it may make the process more efficient.

Question 19

Money is:

Accepted Answer

Money is not backed by gold anymore and its definition has evolved to include both physical currency and digital or electronic forms. Money is also not an item used in barter but a widely accepted medium of exchange. Money can be a liquid asset depending on its form and how quickly it can be converted into cash.

Question 20

Barter is the:

Accepted Answer

Barter is the direct exchange of goods and services without the use of money as a medium of exchange. While bartering usually involves the exchange of goods for goods, it can also involve the exchange of services for goods or services for services. Therefore, option A is the correct answer. Option B is incorrect because bartering can involve the exchange of both goods and services. Option C is incorrect because barter does depend on a coincidence of wants, where each party has something the other wants. Option D is also incorrect because bartering is most commonly used in less advanced economies, where monetary systems may not be as well-established.

Quiz 18: Money and the Federal Reserve System