Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 11 The Monetary System
11.1 What Is Money?
1) Which statement about money is most correct?
A) Money is a new invention and only includes dollar bills and coins.
B) Money is a new invention and can include anything that is accepted as a means of
payment.
C) Money has been around for a long time and can include anything that is accepted as a
means of payment.
D) Money has been around for a long time and only includes dollar bills and coins.
E) Money has been around for a long time and only includes checking and savings
accounts.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
2) For a commodity or token to be money it must
A) be accepted in exchange for all other goods and services.
B) have a double coincidence of wants.
C) be backed by government precious metals, like gold.
D) be paper.
E) be issued by the government or a government agency.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
3) Money is any commodity or token that is
A) backed by gold.
B) generally accepted as a means of measurement.
C) generally accepted as a means of payment.
D) issued by the government.
E) a store of value.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
1
4) Money is any commodity or token that
A) is generally accepted as a means of payment.
B) is backed up and controlled by the government.
C) is naturally accepted by households to accumulate wealth.
D) does not change in value over time.
E) is backed by gold.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
5) In order for any given commodity to be considered money, it has to
A) have some intrinsic value.
B) be generally acceptable as a means of payment.
C) be issued and controlled by some governmental institution.
D) be convertible into gold or silver.
E) be used in barter transactions.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
6) For anything to be considered money it must be
A) a valuable commodity, such as gold.
B) a token, such as a green piece of paper.
C) either a commodity or a token, as long as it is generally accepted as a means of
payment.
D) a mystical token, such as whale teeth.
E) used in barter transactions.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
2
7) A common trait of money through history and across cultures is that money
A) always had mystical properties.
B) was always issued by the local government.
C) was always based on gold or some other precious commodity.
D) was always generally accepted as a means of payment.
E) was always iat money.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
8) Money is best deined as
A) anything that has value.
B) anything accepted as a means of payment.
C) anything that can be sold to pay for something.
D) currency.
E) anything that is backed by gold.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
9) Money must be ________ which includes the fact that is should ________.
A) in physical form; not be transferable using electronic means
B) accepted as a means of payment across countries’ borders; not be iat money
C) generally accepted as a means of payment; be recognizable and divisible into small parts
D) whatever is used in a barter system; transferable across countries’ borders
E) backed by gold; not decrease in value over time
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
3
10) For an asset to be a “means of payment,” the asset
A) is valuable and backed by gold.
B) is valuable and backed by the government.
C) can be used to settle a debt.
D) requires a double coincidence of wants.
E) must be used when bartering.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
11) The functions of money are
A) medium of exchange, unit of account, and store of value.
B) medium of exchange, the ability to buy goods and services, and the ability to pay of
debts.
C) medium of exchange, the ability to buy goods and services, and checking accounts.
D) credit cards, checking accounts, currency, and coins.
E) store of value, use as a barter mechanism, and unit of account.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
12) Money serves as a
A) means of payment, legal obligation, and public tax.
B) medium of exchange, unit of account, and store of value.
C) means of settling debts, transaction lubricant, and private commodity.
D) means of worker exploitation and capitalist enrichment.
E) means to conduct barter transactions.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
4
13) Which of the following is NOT among the primary functions of money?
A) unit of account
B) store of value
C) indicator of supply
D) medium of exchange
E) an object that is generally accepted in return for goods and services
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
14) Money performs all of the following functions EXCEPT serving as a
i. medium of exchange.
ii. unit of account.
iii. barter mechanism.
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
15) When you join the local organic food market and then buy produce each month, money
is used as
A) only a store of value.
B) only a unit of account.
C) a medium of exchange and a store of value.
D) a medium of exchange and a unit of account.
E) a store of value and a unit of account.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
5
16) Barter requires the
A) use of commodity money as a medium of payment.
B) use of iat money as a medium of exchange.
C) the triple non-coincidence of wants.
D) exchange of goods and services directly for other goods and services.
E) use of money as a unit of account.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
17) The medium of exchange is deined as
A) barter.
B) the exchange of goods and services directly for goods and services.
C) an object that is accepted in return for goods and services.
D) credit cards.
E) an item that can be stored and hold its value over time.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
18) A barter system of payment is
A) similar to a money system of payment because both require a double coincidence of
wants.
B) similar to a money system of payment because both use one asset as a unit of account.
C) diferent from a money system of payment because the barter system is a better unit of
account.
D) diferent from a money system of payment because money does not require a double
coincidence of wants.
E) similar to a money system of payment because both are used as stores of value and units
of account.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
6
19) In performing which of its primary functions does money solve the problem of the
double coincidence of wants?
A) medium of exchange
B) unit of account
C) store of value
D) barter system
E) money supply
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
20) The “double coincidence of wants” is
A) what is needed to use money.
B) eliminated with the use of money.
C) eliminated when we barter instead of using money.
D) how value is stored when we transact with money.
E) money’s role as a unit of account.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
21) When we use money to purchase goods and services, we are using money as a
A) unit of account.
B) reserve of wealth.
C) medium of exchange.
D) store of value.
E) bartering tool.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
7
22) When you use currency to buy lunch, money is performing which function?
A) medium of exchange
B) unit of purchase
C) store of value
D) barter token
E) unit of currency
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
23) What is a problem with barter that makes it so diicult to use?
A) Individuals have to produce something to trade with.
B) Barter requires a double coincidence of wants.
C) Barter is very eicient but illegal because it avoids taxation.
D) Barter requires use of only iat money.
E) Barter omits the store of value role for money.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
24) Which of the following best describes a double coincidence of wants?
A) Two buyers want the same good.
B) Neither buyer wants a good.
C) You have what another wants and you want what they have.
D) A buyer and a seller rather than two buyers or two sellers must meet.
E) None of the above answers is correct.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
8
25) The unit of account is deined as
A) the exchange of goods and services directly for other goods and services.
B) barter.
C) an object that is accepted in return for goods and services.
D) an agreed upon measure for stating prices of goods and services.
E) the medium of exchange.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
26) If you shop for a car online and compare car prices across dealerships, money is
functioning as a
A) medium of exchange.
B) unit of account.
C) means of payment.
D) store of value.
E) barter mechanism.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
27) The function of money that helps assess the opportunity cost of an activity is money‘s
use as a
A) medium of exchange.
B) store of value.
C) unit of account.
D) store of debt.
E) barter tool.
Skill: Level 1: Deinition
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
9
28) When we put a price tag on goods and services, we are using money as a
A) store of value.
B) medium of exchange.
C) barter token.
D) unit of account.
E) means of payment.
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
29) When you see a mansion and think to yourself that it must be worth a million dollars,
you are using money to perform which function?
A) medium of exchange
B) unit of account
C) store of value
D) means of payment
E) method of avoiding barter
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
30) Money is used as a ________ when you visit the local farmers’ market and compare
prices across diferent vendors.
A) means of payment
B) unit of account
C) store of value
D) medium of exchange
E) measure of barter
Skill: Level 2: Using deinitions
Section: Checkpoint 11.1
Status: Old
AACSB: Relective thinking
10