Economics Today, 19e (Miller)
Chapter 15 Money, Banking, and Central Banking
15.1 Functions and Measures of Money
1) In a barter system, there are
A) many different units of money.
B) money and goods exchanged for each other.
C) financial institutions to facilitate all exchanges.
D) goods traded directly for other goods and services.
2) Money functions as
A) a store of value.
B) an unit of account.
C) a medium of exchange.
D) all of the above.
3) A barter arrangement basically means
A) a cashless transaction.
B) a credit deal.
C) buying with an I.O.U.
D) exchanging goods for cash.
4) For barter to occur there must be
A) no markets for people to exchange goods.
B) a double coincidence of wants for each good to be exchanged.
C) one person who pays cash.
D) services in exchange for goods.
5) A barter arrangement simply means
A) a direct exchange of goods without the use of money.
B) a promise to pay in the future.
C) that gold must be offered from one party.
D) the government has to facilitate the exchange.
6) The direct exchange of goods and services for other goods and services is known as
A) barter.
B) purchasing power.
C) intermediation.
D) remediation.
7) Without an accepted medium of exchange, people
A) have to specialize in one area of production.
B) have to rely on gold or silver in order to exchange goods and services.
C) have to rely on barter in order to exchange goods and services.
D) have to use credit to obtain goods and services.
8) As a result of money in an economy
A) people are greedier than in a barter economy.
B) people can get rich more quickly with the same amount of goods and services available.
C) transaction costs are higher than would be the case in a barter economy.
D) real Gross Domestic Product (GDP) and economic growth are greater than they would be in a
barter economy.
9) Which of the following represents a function of money?
A) medium of exchange
B) unit of accounting
C) standard of deferred payment
D) all of the above
10) Money is defined as
A) a person’s net worth.
B) anything people generally accept in exchange for goods and services.
C) a by product of a barter economy.
D) any financial instrument that is backed by gold.
11) Which of the following statements does NOT describe a function of money?
A) a store of value
B) a hedge against inflation
C) a standard of deferred payment
D) a unit of accounting
12) When you buy a hotdog for lunch, you are using money as a
A) store of value.
B) standard of deferred payment.
C) medium of exchange.
D) unit of accounting.
13) When money is accepted as payment in a market transaction, it is functioning as a
A) store of value.
B) unit of accounting.
C) medium of exchange.
D) unit of investment.
14) Money as a medium of exchange
I. Facilitates the exchange of goods
II. Reduces the incentive to barter
A) I only
B) II only
C) Both I and II
D) Neither I nor II
15) The use of money as a medium of exchange
I. lowers transaction costs.
II. permits more specialization.
A) I only
B) II only
C) Neither I nor II
D) Both I and II
16) A price tag of $4 for a portable power bank is an example of money as
A) a medium of exchange.
B) a unit of accounting.
C) a store of value.
D) a time deposit.
17) When money provides a yardstick that allows individuals to compare the relative values of
goods and services, it is functioning as a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
18) When money serves as a standard for comparing values of different things, it is functioning
as a
A) store of value.
B) hedge against inflation.
C) standard of deferred payment.
D) unit of accounting.
19) To function as money, something must hold its purchasing power over time. That is, it must
be a
A) store of value.
B) standard of deferred payment.
C) unit of accounting.
D) medium of exchange.
20) If you save $20,000 for a down payment on a house, you are using money as
A) a store of value.
B) a unit of account.
C) a medium of exchange.
D) a standard of deferred payment.
21) To be accepted as money, an item must perform all of the following functions EXCEPT
A) serve as a store of value.
B) be easily reproduced.
C) be a medium of exchange.
D) serve as a standard of deferred payment.
22) In economics, money is
A) another term for income.
B) a financial instrument backed by some precious metal such as gold or silver.
C) anything that people generally accept in exchange for goods and services.
D) whatever the government defines it to be.
23) When you set aside the money you have today in order to purchase goods and services later
on, you are using money as a
A) medium of exchange.
B) standard of deferred payment.
C) unit of accounting.
D) store of value.
24) The most important function of money is when money is used as a
A) medium of exchange.
B) standard of deferred payment.
C) unit of accounting.
D) store of value.
25) For something to serve as money, it must be
A) backed by the authority of the government.
B) generally accepted by buyers and sellers.
C) light, durable, and common.
D) convertible to gold.
26) Which of the following is NOT one of the functions of money?
A) medium of exchange
B) protection from increases in prices of goods and services
C) unit of accounting
D) store of value
27) The function of money as a store of value diminishes if
A) prices of goods and services increase.
B) interest rates increase.
C) people begin to barter.
D) money is no longer backed by gold.
28) Which of the following statements is NOT true about money?
A) Anything that serves as a medium of exchange, as a unit of accounting, as a store of value,
and as a standard of deferred payment can be called money.
B) Money is any medium that is universally accepted by sellers and creditors.
C) Money is a standard of deferred payment.
D) Money can only be coins and paper.
29) A medium of exchange is
A) any asset that sellers will accept as payment.
B) a measure by which prices are expressed.
C) an asset that is used to settle future debts.
D) the thing traded when barter takes place.
30) Any asset that sellers will accept as payment is a(n)
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
31) Without an accepted medium of exchange
A) there would be no trade.
B) people would have to rely on gold or silver in order to exchange goods and services.
C) goods and services would be exchanged by barter.
D) prices are very difficult to determine.
32) One of the benefits of money as a medium of exchange is that
A) it allows for private transactions such as trading vegetables for medical services.
B) it allows individuals to compare the relative value of goods.
C) over time it will become more valuable so that individuals can purchase more goods and
services.
D) it allows for specialization that leads to economic efficiencies.
33) The direct exchange of goods and services for other goods and services is known as
A) primitive trade.
B) nonmarket trade.
C) barter.
D) purchasing power parity.
34) The direct exchange of goods and services for other goods and services without the use of
money is
A) a standard of deferred payment.
B) barter.
C) a store of value.
D) financial intermediaries.
35) Which function of money allows people to specialize in areas in which they have a
comparative advantage?
A) medium of exchange
B) unit of accounting
C) store of value
D) standard of deferred payment
36) Compared to a barter economy, an economy that uses money will
A) be greedier.
B) be poorer.
C) have more corruption.
D) have more output.
37) Which of the following is NOT a benefit of money when used as a medium of exchange?
A) allowing individuals to specialize
B) allowing individuals to pay off debts
C) allowing for some economic efficiencies
D) providing economic growth
38) As a unit of account, money is used
A) to define prices of all other goods.
B) to pay off future debts.
C) to hold purchasing power over time.
D) to exchange for goods and services.
39) The function of money that allows individuals a method to compare the relative value of
goods and services is
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) liquidity.
40) A measure by which prices are expressed is a(n)
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
41) The function of money that provides for a commonly recognized measure of value for the
price system is a(n)
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
42) Camels have been used as money. Which function of money would this type of money
perform least well?
A) medium of exchange
B) unit of accounting
C) store of value
D) standard of deferred payment
43) Which term below fits closest to money functioning as a unit of accounting?
A) medium of exchange
B) adverse selection
C) standard of value
D) liquidity
44) Which function of money allows for comparison shopping?
A) medium of exchange
B) unit of accounting
C) store of value
D) standard of deferred payment
45) Money serves as a standard of value, which is another way of saying that money functions as
A) a medium of exchange.
B) a unit of accounting.
C) an opportunity cost of investment.
D) standard of deferred payment.
46) Cigarettes served as money in some prisoner of war (POW) camps during World War II.
Given this, we would expect to observe
A) no one ever smoking a cigarette.
B) people usually resorting to barter rather than using cigarettes as money.
C) prices of other goods expressed in terms of cigarettes.
D) only government-issued cigarettes being accepted as money.
47) If something serves as a store of value, we expect it to be
A) divisible.
B) durable.
C) of intrinsic value.
D) light.
48) The ability of an asset to hold its value over time is a(n)
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
49) If something is to serve as money it must be a store of value. This means that it must
A) be divisible.
B) be the standard by which all goods are compared in setting prices.
C) hold its purchasing power over time.
D) be liquid.
50) Money that we have today can be set aside to purchase things in the future. This function of
money is known as
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
51) Money provides a way to transfer wealth into the future. This function of money is known as
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
52) If lenders refuse to state the debt in terms of dollars, then dollars are NOT a
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
53) The property of money that allows for the settling of debts that mature in the future is
A) liquidity.
B) acceptability.
C) store of value.
D) standard of deferred payment.
54) A property of an asset that makes it desirable for use as a means of settling debts maturing in
the future is a(n)
A) medium of exchange.
B) unit of accounting.
C) store of value.
D) standard of deferred payment.
55) What characteristic defines something as money?
A) assets declared by the government to be of value
B) a medium of exchange widely accepted in an economy
C) notes you can deposit in a savings account
D) an asset that earns interest
56) The requirement for a double coincidence of wants occurs when
A) there is inflation.
B) there is deflation.
C) a system of barter is used.
D) the medium of exchange is liquid.
57) When money serves as a store of value, it allows you to
A) transfer wealth into the future.
B) eliminate a double coincidence of wants.
C) be an effective negotiator.
D) find good bargains.
58) Money serves as a medium of exchange means that
A) it benefits both buyers and sellers.
B) it reduces transaction costs.
C) it eliminates the need for barter.
D) All of the above are correct.
59) The advantage of holding money as an asset is that
A) money earns interest.
B) money is liquid.
C) money is safe from thievery.
D) the value of money appreciates over time.
60) The existence of money in an economy promotes efficiency by
A) creating an equal distribution of income.
B) creating incentives to be self-sufficient.
C) facilitating trade, thereby allowing for greater specialization.
D) allowing for the formation of corporations as legal entities.
61) Which of the following is NOT a function of money?
A) medium of exchange
B) form of credit
C) store of value
D) standard of deferred payment
62) When a consumer compared the price of a tablet with the price of a laptop, she discovered
the laptop was more expensive. This is an example of using money as
A) a store of value.
B) a medium of exchange.
C) a unit of accounting.
D) a standard of deferred payment.