Q 1-20 Flashcards
1-20
A monetary system malfunctions if
a. there is a sharp reduction in the quantity of money
b. there is unexpected inflation
c. the value of money drops to zero
d. it hinders the exchange mechanism
e. all the above occurs
e. all the above happens
Chapter 1, p. 3-5
Checking deposits
a. are used to make a large proportion of the value of all
purchases
b. are not money
c. are identical to currency
d. can be used to make any and all purchases
e. are the small change of our financial system
a. are used to make a large proportion of the value of all purchases
Chapter 1, p. 5-11
Families use ______ for the largest percent of their expenditures.
a. currency
b. checks
c. credit cards
d. wire transfers
e. telex messages
b. checks
Chapter 1, p. 5-11
Money acts as
a. a store of wealth
b. a medium of exchange
c. a standard of value
d. all of the above
e. none of the above
d. all of the above
Chapter 1, p. 5-11
Money if a medium of exchange because
a. people exchange goods for goods
b. people exchange goods and services for money, and
then exchange money for the goods and services they
want
c. money has inherent value
d. there is a double coincidence of wants for goods
e. of b and c only
b. people exchange goods and services for money, and
then exchange money for the goods and services they
want
Chapter 1, p. 5-11
In a barter system,
a. goods are exchanged directly for goods
b. there must be a double coincidence of wants
c. trade depends on finding someone who wants what we
have and has what we want
d. trade problems arise because of the indivisibility of
many goods
e. all the above happens
e. all the above happens
Chapter 1, p. 5-11
Indirect barter
a. is a system in which people directly exchange goods
they possess for those they desire
b. is the same as simple barter
c. is not an exchange mechanism
d. may lead to a useful trade good becoming money
e. cannot occur unless there is a double coincidence of
wants
d. may lead to a useful trade good becoming money
Chapter 1, p. 5-11
Though rarely used in a modern economy, transactions may be conducted by barter if
a. money is a better store of value
b. there is massive inflation
c. prices are allowed to adjust to equilibrium
d. all the above happens
e. only b and c happen
b. there is massive inflation
Chapter 1, p. 5-11
For something to satisfy the medium-of-exchange function of money, it must be
a. backed by gold
b. readily exchangeable for other goods
c. issued by a central government
d. used only for direct barter
e. an inherently valuable commodity
b. readily exchangeable for other goods
Chapter 1, p. 5-11
Barter may be used in a modern economy when
a. the monetary system breaks down during a gigantic
inflation
b. governments impose controls setting maximum prices
c. there are laws setting a minimum price
d. the tax rate in a country is very high
e. all the above happens
e. all the above happens
Chapter 1, p. 5-11
Money is a standard of value because
a. we use money as a way of comparing the relative values
of various items
b. we use money instead of barter in exchanging goods
and services
c. we express the values of goods and services in terms of
money
d. we express the values of goods and services in terms of
each other
e. of both a and c
e. of both a and c
Chapter 1, p. 5-11
Suppose that a very simple economy with no standard of value produced 10 goods. How many exchange ratios would have to be learned and remembered to trade these goods?
a. 45
b. 90
c. 10
d. 20
e. None of the above
a. 45
Chapter 1, p. 5-11
For creditors, money may be a poor store of wealth because as prices rise, the real values of their claims
a. decline
b. rise
c. become volatile
d. are constant
e. are none of the above
a. decline
Chapter 1, p. 5-11
Money serves as a store of wealth because
a. its purchasing power remains constant over time
b. its purchasing power fluctuates over time
c. the alternative to holding wealth in money involves high
transaction costs
d. other stores of wealth have a constant value, so that
holding them means missing out on potential capital
gains
e. the government keeps its real value constant
c. the alternative to holding wealth in money involves high
transaction costs
Chapter 1, p. 5-11
The four functions of money
a. are not all fulfilled by the U.S. dollar
b. have always been fulfilled by the same monetary unit at
the same time
c. should all be fulfilled by the same monetary unit for con
venience and efficiency
d. are limited by seigniorage
e. are all the above
c. should all be fulfilled by the same monetary unit for con
venience and efficiency
Chapter 1, p. 5-11
