Econ- 2.3 Part 1 Formative Assessment- Option 2

Why do we use money instead of the barter system?

• Money is more efficient for exchanging goods and services.

• The barter system is illegal.

• Money is universally accepted.

• The barter system is too complicated.

Identify any of the major problems with the barter system?

• It requires a double coincidence of wants.

• Items used are always universally accepted

• It is difficult to find someone who wants what you have.

• It is time-consuming and inefficient.

• Items used tend to be very divisible.

Which type of money has intrinsic value and can be used for other purposes?

Answer: (a)  

Organize each of the follow items that have been used as money into the proper type of money it is.

Groups:

(a) Commoodity Money

,

(b) Commondity-Backed Money

,

(c) Fiat

• Agricultural Goods

• Gold

• Gold-backed US dollars

• British Pounds

• US dollars

• Cotton-Back Dollars in the US South

What is one characteristic we want money to have?

• Universal acceptance

• Abundance

• Intrinsic value

• Non-portability

What does it mean for money to be relatively scarce?

• Money is abundant and easy to obtain.

• Money is limited in supply.

• Money is difficult to transport.

• Money is easily divisible.

I can easily carry a large amount of money in my wallet. This shows which characteristic of money?

(a)  

Provide an example of a situation where money is being used as a unit of account.

Which function of money is being shown in the following:

Laura finds out that her hourly wage is $15, which helps her calculate how many hours she needs to work to buy a new bike that costs $300.

• Medium of Exchange

• Unit of Account

• Store of Value

Which function of money is being used in the following:

Kevin receives a gift of $200 from his grandparents and decides to keep it in his piggy bank for a future purchase.

• Medium of Exchange

• Store of Value

• Unit of Account