Economics Final Study Guide

When prices are used to compare the value of 2 different goods, which of the functions of money is being applied?

• Portability

• Store of Value

• Unit of Account

• Divisibility

Which of the following statements most accurately describes the problem of the double coincidence of wants?

• The problem of the double coincidence of wants is when 2 people want the same good.

• The problem of the double coincidence of wants occurs when you have difficulty finding a trading partner who is interested in what you have to trade.

• The problem of the double coincidence of wants occurs when more than 2 people want to trade for the same items.

• The problem of the double coincidence of wants is that 2 trading partners can't agree on a price.

Which of the following items would be best suited for use as money?

• Candy Canes

• Space ships

• Snowmen

• Rare Van Gogh painting

In what KEY way is paper money SUPERIOR to gold coins?

• Paper money is more likely to catch fire than gold coins.

• Paper money is more portable than gold coins.

• Paper money can be easily printed and the supply expanded.

• Paper money is inherently valuable but gold is not.

Imagine the government creates (prints) money to pay for a war, what do you expect to happen with inflation?

• Inflation will increase.

• Inflation will decrease.

• Nothing will happen.

• Deflation will occur.

What is one reason people might dislike inflation?

• They hate balloons.

• Their wages may not rise as fast as prices.

• If they are borrowers, inflation erodes their loan.

• None of the above, inflation always helps consumers.

Which of the following descriptions of the CPI is MOST ACCURATE?

• The CPI is calculated based on the change in gasoline prices each year.

• The CPI is a simple average of the change in price in the 100 most popular goods each year.

• The CPI is calculated based on the modal price of the top 50 video games sold each year.

If I deposit 100 dollars in the bank and the bank agrees to give me a dollar after a year in interest on that 100 dollars, what is the interest rate?

• 0.1%

• 1%

• 10%

• 100%

• None of the above

If the inflation rate is 5% and the nominal interest rate is 7%, what is the real interest rate?

• 2%

• 5%

• 7%

• 12%

• None of the above

When there is unexpected inflation, who benefits?

• Borrowers with fixed interest rates

• Lenders with fixed interest rates.

• Borrowers with adjustable rates.

• Everyone benefits.