Understanding Money and Financial Systems

To an economist, ________ is anything that is generally accepted in payment for goods or services or in the repayment of debt.

• money

• wealth

• income

• credit

Currency includes

• paper money and coins.

• paper money, coins, and checks.

• paper money and checks.

• paper money, coins, checks, and savings deposits.

The total collection of pieces of property that serve to store value is a person's

• wealth.

• income.

• money.

• credit.

________ is a flow of earnings per unit of time.

• Income

• Money

• Wealth

• Currency

The difference between money and income is that

• money is a stock and income is a flow.

• money is a flow and income is a stock.

• there is no difference-money and income are both stocks.

• there is no difference-money and income are both flows.

________ are the time and resources spent trying to exchange goods and services.

• Transaction costs

• Contracting costs

• Barter costs

• Bargaining costs

Which of the following statements best explains how the use of money in an economy increases economic efficiency?

• Money increases economic efficiency because it decreases transactions costs.

• Money cannot have an effect on economic efficiency.

• Money increases economic efficiency because it is costless to produce.

• Money increases economic efficiency because it discourages specialization.

All of the following are necessary criteria for a commodity to function as money EXCEPT

• it must deteriorate quickly.

• it must be divisible.

• it must be easy to carry.

• it must be widely accepted.

Bao Chan purchasing football tickets with a $100 bill is an example of the ________ function of money.

• medium of exchange

• unit of account

• store of value

• specialization

Apple notices that all of its products (iPhone, MacBook, iMac, Mac Mini,…) are on sale for $1,000. In this case money is functioning as a

• unit of account.

• medium of exchange.

• store of value.

• payments-system ruler.