ECO121-CHAP29

In an economy that relies upon barter,

• a.

  trade does not require a double coincidence of wants.

• b.

  scarce resources are allocated just as easily as they are in economies that do not rely upon barter.

• c.

  there is no item in the economy that is widely accepted in exchange for goods and services.

• d.

  All of the above are correct.

The existence of money leads to

• a.

  greater specialization in production, but not to a higher standard of living.

• b.

  a higher standard of living, but not to greater specialization.

• c.

  greater specialization and to a higher standard of living.

• d.

  neither greater specialization nor to a higher standard of living.

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 real assets are not regarded as money.

• d.

  those types of wealth that are regularly accepted by sellers in exchange for goods and services.

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.

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.

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.

In which of the following sets of assets are the assets correctly ranked from most liquid to least liquid

• a.

  money, bonds, cars, houses

• b.

  money, cars, houses, bonds

• c.

  bonds, money, cars, houses

• d.

  bonds, cars, money, houses

When 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 fiat money.

• d.

  has intrinsic value.

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.

  the least liquid asset but a perfect store of value.

• d.

  the least liquid asset and an imperfect store of value.

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.