Econ: Unit 3

Twenty-dollar bills travel nicely in a wallet, while a cow would likely require a special vehicle for travel to the store across town. In other words, cow are not:

• Uniform

• Portable

• Durable

• Divisible

Answer explanation

Cows are large and require special transport, making them not portable. In contrast, twenty-dollar bills are easily carried in a wallet, highlighting the difference in portability.

Drew bought $56 worth of school supplies at a discount store. Drew paid for the goods with two $20 bills, three $5 bills, and a $1 bill. Which function of money did Drew exhibit?

• Medium of exchange

• Store of value

• Unit of account

• University

Answer explanation

Drew used money to pay for school supplies, demonstrating the 'medium of exchange' function. This function allows individuals to trade goods and services, which is exactly what Drew did with his payment.

Mrs. Hatcher has a twenty-dollar bill that can be easily exchanged for other denominations, but a cow cannot. In this way, a cow is not _________.

• Portable

• Divisible

• Acceptable

• Durable

Answer explanation

A cow cannot be easily divided into smaller units like money can. Therefore, it is not divisible, while a twenty-dollar bill can be exchanged for smaller denominations, making it divisible.

Shane and Joe were discussing different types of money. Shane mentioned that _____ is money that does not have intrinsic value and does not represent an asset in a vault somewhere.

• Representative money

• Durable money

• Fiat money

• Portable money

Answer explanation

Fiat money is currency that has no intrinsic value and is not backed by a physical asset. It derives its value from government regulation or law, making it the correct choice in this context.

Last year, Jordan stashed her birthday money in her sock drawer. She is saving for a new computer. Which function of money did Jordan exhibit?

• Medium of exchange

• Store of value

• Unit of account

• Universality

Answer explanation

Jordan is saving her birthday money for a new computer, which shows she is preserving its value over time. This demonstrates the 'store of value' function of money, as she intends to use it later.

Julio and Lily noticed that cows come in all shapes and sizes while 20-dollar bills are the same size and shape and value. In other words, twenty-dollar bills are ___

• Durable

• Portable

• Uniform

• Divisible

Answer explanation

Twenty-dollar bills are uniform because they are all the same size, shape, and value, unlike cows, which vary in appearance. This consistency in bills makes them easily recognizable and standard across transactions.

Donovan has a certificate that can be exchanged for a certain amount of gold. This certificate is an example of _____.

• Representative money

• Durable money

• Fiat money

Answer explanation

Donovan's certificate represents a claim to a specific amount of gold, making it representative money. Unlike fiat money, which has value by government decree, representative money is backed by a physical commodity.

During a classroom discussion, Daniel asked Peter about fiat money. Peter explained that fiat money:

• Exists by government decree

• Only has use as a medium of exchange, store of value, and unit of account

• Is divisible, recognizable, portable, and acceptable

• All of the above

Answer explanation

Fiat money is established by government decree, serves as a medium of exchange, store of value, and unit of account, and possesses qualities like divisibility, recognizability, portability, and acceptability. Thus, 'All of the above' is correct.

JonnieMae and Daniel are discussing the role of central banks. Daniel asks, "What do central banks sell to ensure the stability of the economy?" JonnieMae replies, "Silly goose! They sell ___!"

• government bonds

• corporate stocks

• real estate properties

• consumer goods

Answer explanation

Central banks sell government bonds to manage the money supply and influence interest rates, which helps ensure economic stability. Other options like corporate stocks or consumer goods are not typically sold by central banks.

During a class discussion on economics, Charles asked Noah about how central banks operate. Noah explained that most central banks in the world today:

• Are managed directly by their nation’s elected officials

• Have to submit their monetary policy decisions to the fiscal authorities for approval

• Are given certain independence from the government

• Do not set inflation targets to promote price stability

Answer explanation

Most central banks operate with a degree of independence from the government to ensure that monetary policy is not influenced by political pressures, allowing them to focus on long-term economic stability.