What Makes Money Important?

Money is valuable because it is accepted in the buying and selling of goods and services, making trading easier than with barter. What best explains why money is considered a Medium of Exchange?

• It is accepted for buying and selling of goods and services.

• It is made from precious metals.

• It is regulated by the government.

• It is limited in supply.

Money acts as a store of value, meaning it maintains wealth over time. If you work today, you can get paid in money and wait to spend it in the future.

• It maintains wealth over time because money can be saved and spent in future.

• It reduces wealth over time due to inflation.

• It only functions as a medium of exchange, not storing value.

• It is used only for speculative investment.

Money serves as a measure of value by expressing how much goods and services are worth. Which option best explains how this works?

• It provides a common standard to compare prices

• It solely creates wealth

• It measures only luxury goods

• It restricts economic growth

Inflation is defined as

• An overall increase in the price level

• A decrease in the price level

• A stable price level over time

• None of the above

Inflation usually coincides with an increase in what?

• Cost of living

• Price of a single good

• Supply and demand

What is deflation identified as?

• A decrease in the price of one or a few goods

• Continuous falling prices/wages for well over a year

• An increase in wages

Deflation is usually caused by a sustained decrease in _______.

• wages

• interest rates

• consumer spending

• money supply

What does deflation result in?

• Increase in average prices of goods

• Sustained decrease in average prices of all goods and services

• Increase in production

Deflation is usually accompanied by sustained periods of falling production, unemployment, and limited _______.

• capital investment (wealth)

• consumer spending

• aggregate demand

• credit availability

What does 'M' indicate in the equation MV=PQ?

• Money supply

• Velocity of money

• Overall price level

• Quantity of goods and services