chapter 10: money and banking

Question 1

anything that people will accept as payment for goods and services

Answer 1

money

Question 2

money must serve as

Answer 2

medium of exchange, standard of value, and store of value

Question 3

without money economic transactions must be made through

Answer 3

barter

Question 4

barter is inefficient because

Answer 4

two people who want to barter must at the same time want what the other has

Question 5

what allows for the precise and flexible pricing of goods and services, making any economic transaction convenient

Answer 5

money

Question 6

means through which goods and services can be exchanged

Answer 6

medium of exchange

Question 7

exchange of goods and services without using money

Answer 7

barter

Question 8

basic monetary unit in US

Answer 8

dollar

Question 9

determines the economic worth in the exchange pricess

Answer 9

standard of value

Question 10

because of store of value

Answer 10

people do not have to spend all their money at once or at one place

Question 11

money does not function well as store of value when

Answer 11

the economy experiences significant inflation

Question 12

something that holds its value over time

Answer 12

store of value

Question 13

physical properties of money

Answer 13

• durability
• portability
• divisibility
• uniformity

Question 14

economic properties of money

Answer 14

• stability of value
• scarcity
• acceptability

Question 15

types of money

Answer 15

• commodity
• representative
• fiat

Question 16

derives its value from the type of material from which it is composed

Answer 16

commodity money

Question 17

backed by something tangible

Answer 17

representative money

Question 18

declared by the government and accepted by citizens to have worth

Answer 18

fiat money

Question 19

something that has a value for what it is

Answer 19

commodity money

Question 20

most common use of commodity money throughout history has been

Answer 20

coins made from precious metals

Question 21

one problem with commodity money is

Answer 21

if the item becomes too valuable, people will hoard it rather than circulate it

Question 22

commodity money is _______ used today

Answer 22

rarely

Question 23

paper money that can be exchanged for something else of value

Answer 23

representative money

Question 24

government got involved by

Answer 24

regulating how much metal needed to be stored to back up the paper money

Question 25

one problem with representative money is

Answer 25

its value fluctuates with the supply and price of gold or silver which can cause problems of inflation or deflation

Question 26

only has value because government has issued a order saying that is the case

Answer 26

fiat money

fiat- order

Question 27

only token amount of precious metal that is worth far less than the face value (fiat money)

Answer 27

coins

Question 28

has no intrinsic value (fiat money)

Answer 28

paper money

Question 29

people accept that fiat money will

Answer 29

fulfill all functions of money

Question 30

government role in fiat money is

Answer 30

maintaining the value of fiat money is controlling its supply ( maintaining scarcity)