1. Which of the following lists is included in what economists call “money”?
a.
cash
b.
cash and stocks and bonds
c.
cash and stocks and bonds and real estate
d.
cash and stocks and bonds and real estate and all other assets
2. Economists use the term “money” to refer to
a.
all wealth.
b.
all assets, including real assets and financial assets.
c.
all financial assets, but not real assets.
d.
those types of wealth that are regularly accepted by sellers in exchange for goods and services.
3. Economists use the word “money” to refer to
a.
b.
c.
d.
4. Economists equate money with
a.
individual wealth.
b.
income regularly earned.
c.
assets people use regularly to buy goods and services.
d.
individual saving.
5. Which of the following is a function of money?
a.
a unit of account
b.
a store of value
c.
medium of exchange
d.
All of the above are correct.
6. The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money
a.
being a unit of account.
b.
being a medium of exchange.
c.
serving as a store of value.
d.
having intrinsic value.
7. You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?
a.
medium of exchange
b.
unit of account
c.
store of value
d.
liquidity
8. You receive money as payment for babysitting your neighbors’ children. This best illustrates which function of money?
a.
medium of exchange
b.
unit of account
c.
store of value
d.
liquidity
9. Which of the following best illustrates the medium of exchange function of money?
a.
You keep some money hidden in your shoe.
b.
You keep track of the value of your assets in terms of currency.
c.
You pay for your oil change using currency.
d.
None of the above is correct.
10. Any item that people can use to transfer purchasing power from the present to the future is called
a.
a medium of exchange.
b.
a unit of account.
c.
a store of value.
d.
None of the above is correct.
11. Dollar bills, rare paintings, and emerald necklaces are all
a.
media of exchange.
b.
units of account.
c.
stores of value.
d.
All of the above are correct.
12. Which of the following is a store of value?
a.
cash and stocks
b.
cash but not stocks
c.
stocks but not cash
d.
neither cash nor stocks
13. Which of the following is a store of value?
a.
currency
b.
U.S. government bonds
c.
fine art
d.
All of the above are correct.
14. Which of the following best illustrates the concept of a store of value?
a.
You are a precious-metals dealer, and you are always aware of how many ounces of platinum trade for an
ounce of gold.
b.
You sell items on eBay, and your prices are stated in terms of dollars.
c.
You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.
d.
None of the above is correct.
15. Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?
a.
store of value
b.
medium of exchange
c.
unit of account
d.
None of the above is correct.
16. Most financial assets other than money function as
a.
a medium of exchange, a unit of account, and a store of value.
b.
a medium of exchange and a store of value, but not a unit of account.
c.
a store of value and a unit of account, but not a medium of exchange.
d.
a store of value, but not a unit of account nor a medium of exchange
17. Which of the following functions of money is also a common function of most other financial assets?
a.
a unit of account
b.
a store of value
c.
medium of exchange
d.
None of the above is correct.
18. Liquidity refers to
a.
the ease with which an asset is converted to the medium of exchange.
b.
the measurement of the intrinsic value of commodity money.
c.
the measurement of the durability of a good.
d.
how many time a dollar circulates in a given year.
19. The ease with which an asset can be
a.
traded for another asset determines whether or not that asset is a unit of account.
b.
transported from one place to another determines whether or not that asset could serve as fiat money.
c.
converted into a store of value determines the liquidity of that asset.
d.
converted into the economy’s medium of exchange determines the liquidity of that asset.
20. Which list ranks assets from most to least liquid?
a.
currency, fine art, stocks
b.
currency, stocks, fine art
c.
fine art, currency, stocks
d.
fine art, stocks, currency
21. Which list ranks assets from most to least liquid?
a.
money, bonds, cars, houses
b.
money, cars, houses, bonds
c.
bonds, money, cars, houses
d.
bonds, cars, money, houses
22. Money is the most liquid asset available because
a.
it is a store of value.
b.
it is a medium of exchange.
c.
it is a unit of account.
d.
it has intrinsic value.
23. Money is
a.
the most liquid asset and a perfect store of value.
b.
the most liquid asset but an imperfect store of value.
c.
not the most liquid asset but a perfect store of value.
d.
neither the most liquid asset and nor a perfect store of value.
24. Money
a.
is a perfect store of value.
b.
is the most liquid asset.
c.
has intrinsic value, regardless of which form it takes.
d.
All of the above are correct.
25. Treasury Bonds are
a.
liquid, but not a store of value.
b.
a store of value, but not liquid.
c.
both liquid and a store of value.
d.
neither liquid nor a store of value.
26. Treasury Bonds are
a.
both a store of value and a medium of exchange.
b.
a store of value, but not a medium of exchange
c.
a medium of exchange, but not a store of value.
d.
neither a store of value nor a medium of exchange.
27. Which of the following is both a store of value and regularly used as a medium of exchange?
a.
cash and stocks
b.
cash but not stocks
c.
stocks but not cash
d.
neither cash nor stocks
28. When we measure and record economic value, we use money as the
a.
liquid asset.
b.
medium of exchange.
c.
unit of account.
d.
store of value.
29. When in France you notice that prices are posted in euros, this best illustrates money’s function as
a.
a store of value.
b.
a medium of exchange.
c.
a unit of account.
d.
a method of barter.
30. Which of the following best illustrates the unit of account function of money?
a.
You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
b.
You pay for your theater tickets with dollars.
c.
You hold currency even though you don’t intend to spend it right away.
d.
None of the above is correct.
31. The “yardstick” people use to post prices and record debts is called
a.
a medium of exchange.
b.
a unit of account.
c.
a store of value.
d.
liquidity.
32. You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank
illustrates money’s function as a _______. The laptop’s price is posted as $500. The $500 price illustrates money’s
function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money’s function as a ______.
a.
store of value, medium of exchange, unit of account
b.
store of value, unit of account, medium of exchange
c.
medium of exchange, unit of account, store of value
d.
medium of exchange, store of value, unit of account
33. Imagine an economy in which: (1) pieces of paper called yollars are the only thing that buyers give to sellers when
they buy goods and services, so it would be common to use, say, 50 yollars to buy a pair of shoes; (2) prices are posted in
terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and (3)
yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,
a.
the yardstick is a medium of exchange but it cannot serve as a unit of account.
b.
the yardstick is a unit of account but it cannot serve as a store of value.
c.
the yardstick is a medium of exchange but it cannot serve as a store of value, and the yollar is a unit of
account.
d.
the yollar is a unit of account, but it is not a medium of exchange and it is not a liquid asset.
34. Commodity money is
a.
backed by gold.
b.
the principal type of money in use today.
c.
money with intrinsic value.
d.
receipts created in international trade that are used as a medium of exchange.
35. Prisoners sometimes determine a single good to be used as money. This good becomes
a.
a medium of exchange and a unit of account.
b.
a medium of exchange, but not a unit of account.
c.
a unit of account, but not a medium of exchange.
d.
neither a unit of account nor a medium of exchange.
36. When colonists in Virginia used tobacco as money, their money
a.
was commodity money.
b.
had no intrinsic value.
c.
was fiat money.
d.
had no store of value.
37. If an economy uses silver as money, then that economy’s money
a.
serves as a store of value but not as a medium of exchange.
b.
serves as a medium of exchange but not as a unit of account.
c.
is commodity money.
d.
has no intrinsic value.
38. Many societies used gold as money, because
a.
it is relatively rare.
b.
it is durable.
c.
it has a relatively low melting point.
d.
All of the above are correct.
39. According to the article “Why Gold?’, silver may be used as money. One problem with using silver as money is that
a.
silver is too abundant.
b.
silver tarnishes over time.
c.
it is not a precious metal.
d.
it has a high melting point.
40. Fiat money
a.
has no intrinsic value.
b.
is backed by gold.
c.
is a medium of exchange but not a unit of account.
d.
is any close substitute for currency such as checkable deposits.
41. Fiat money
a.
is worthless.
b.
has no intrinsic value.
c.
may be used as a medium of exchange, but is not legal tender.
d.
refers to highly liquid assets that do not serve as a medium of exchange.
42. Currently, U.S. currency is
a.
fiat money with intrinsic value.
b.
fiat money with no intrinsic value.
c.
commodity money with intrinsic value.
d.
commodity money with no intrinsic value.
43. All U.S. paper dollars read “This note is legal tender for all debts, public and private.” This statement represents which
characteristic of US currency?
a.
The U.S. operates under the gold standard.
b.
U.S. paper money is commodity money.
c.
U.S. paper money is fiat money.
d.
U.S. paper money is a convenient store of wealth.
44. The legal tender requirement means that
a.
people are more likely to accept the dollar as a medium of exchange.
b.
the government must hold enough gold to redeem all currency.
c.
people may not make trades with anything else.
d.
All of the above are correct.
45. The Soviet government in the 1980’s never abandoned the ruble as the official currency. However, the people of
Moscow preferred to accept
a.
cigarettes in exchange for goods and services, because they were convinced that cigarettes were going to soon
become hard to come by.
b.
American dollars in exchange for goods and services, because rubles were extremely hard to come by.
c.
goods such as cigarettes or American dollars in exchange for goods and services, reminding us of the fact that
government decree by itself is not sufficient for the success of a commodity money.
d.
All of the above are correct.
46. The primary difference between commodity money and fiat money is that
a.
commodity money is a medium of exchange but fiat money is not.
b.
fiat money is a medium of exchange but commodity money is not.
c.
commodity money has intrinsic value but fiat money does not.
d.
fiat money has intrinsic value but commodity money does not.
47. Which type of money has intrinsic value?
a.
commodity money
b.
fiat money
c.
both commodity money and fiat money
d.
neither commodity money nor fiat money
48. If an economy used gold as money, its money would be
a.
commodity money, but not fiat money.
b.
fiat money, but not commodity money.
c.
both fiat and commodity money.
d.
functioning as a store of value and as a unit of account, but not as a medium of exchange.
49. When prisoners use cigarettes or some other good as money, cigarettes become
a.
commodity money, but do not function as a unit of account.
b.
commodity money and function as a unit of account.
c.
fiat money, but do not function as a unit of account.
d.
fiat money and function as a unit of account.
50. Paper money
a.
has a high intrinsic value.
b.
is the primary medium of exchange in a barter economy.
c.
is valuable because it is generally accepted in trade.
d.
is valuable only because of the legal tender requirement.
51. Paper dollars
a.
are commodity money and gold coins are fiat money.
b.
are fiat money and gold coins are commodity money.
c.
and gold coins are both commodity monies.
d.
and gold coins are both fiat monies.
52. For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought
of as
a.
those items that can be readily accessed and used to buy goods and services.
b.
currency only.
c.
currency plus all bank accounts.
d.
currency plus all bank accounts plus bonds.
53. Currency includes
a.
paper bills and coins.
b.
demand deposits.
c.
credit cards.
d.
Both (a) and (b) are correct.
54. The set of items that serve as media of exchange clearly includes
a.
balances that lie behind debit cards.
b.
demand deposits.
c.
other checkable deposits.
d.
All of the above are correct.
55. The set of items that serve as media of exchange clearly includes
a.
demand deposits.
b.
short-term bonds.
c.
credit cards.
d.
All of the above are correct.
56. Demand deposits are a type of
a.
checking account.
b.
time deposit.
c.
money market mutual fund.
d.
savings deposit.
57. People can write checks against
a.
demand deposits and money market mutual funds
b.
demand deposits but not money market mutual funds
c.
money market mutual funds but not demand deposits