NEW
Font size
WorksheetsCh 10-1 Money Functions & Properties
Total questions: 15
Worksheet time: 8mins
A class is comparing two systems: (A) trading wheat for shoes and (B) using dollars to buy shoes. Based on the definitions provided, which statement best explains why system B is a medium of exchange?
It directly swaps one good for another without prices.
It measures economic worth so people can compare values.
It is any item widely accepted to exchange goods and services.
It guarantees that value increases over time regardless of use.
A student argues that without money, people could still use a standard of value to compare goods. Using the text’s definitions, which reasoning best evaluates this claim?
Incorrect, because a standard of value only exists when money is used to measure worth.
Correct, because barter provides market prices that serve as a monetary yardstick.
Incorrect, because barter lacks a common measuring unit; money provides the measure of economic worth.
Correct, because commodity money in barter automatically provides a universal price list.
Two savings options are proposed: (1) hold cash in a secure box, (2) trade cash for perishable fruit to eat later. Using the properties described, which choice best uses money’s function as a store of value?
Option 1, because money holds value over time when kept secure.
Option 2, because goods that spoil quickly typically gain value over time.
Both options equally, because anything exchanged becomes a store of value.
Neither option, because money only measures value and cannot be stored.
A local coupon is backed by a promise to redeem it for a pound of rice. Which economic term from the list best categorizes this type of money?
Fiat money, because the government declares its worth.
Representative money, because it is backed by something real.
Commodity money, because its value comes from what it is made of.
Standard of value, because it compares different goods.
A metal coin is valuable mainly because people need the metal for tools and jewelry. According to the economic terms, what kind of money is this and why?
Commodity money; its value comes from the material itself.
Fiat money; its value is declared by law regardless of material.
Representative money; it can be exchanged for paper receipts.
Store of value; it only holds value but cannot be exchanged.
Analyze the three functions of money described and identify which function would most directly reduce the need for double coincidence of wants in a barter system, explaining the selected function’s role.
Store of value; it preserves purchasing power over time, so people can wait to trade later.
Standard of value; it creates price tags so traders always want the same items.
Medium of exchange; it provides a generally accepted item that separates selling from buying.
All three equally; each function eliminates barter requirements in the same way.
A policymaker proposes a new form of currency made of thin plastic sheets that can be folded, cut into smaller pieces for change, and printed with a standardized design. Using the stated physical properties of money (durability, portability, divisibility, uniformity), which feature still needs further evidence before adopting this currency?
Durability, because thin sheets may not hold up through many transactions
Portability, because plastic sheets are too heavy to carry in a wallet
Divisibility, because you cannot make change with smaller pieces
Uniformity, because a standardized design prevents easy recognition
A local economy considers using rare seashells as money. Based on the economic properties of money (stability of value, scarcity, acceptability), which risk most directly threatens its usefulness if large new deposits of shells are discovered nearby?
Loss of stability of value due to a rapid increase in supply
Lower portability because shells are difficult to carry
Reduced divisibility because shells cannot be split
Decline in uniformity because shells look identical
A historian analyzes three artifacts used as money: gold coins, paper notes redeemable for silver on demand, and modern U.S. currency. Which classification accurately matches each type?
Gold coins: representative money; redeemable paper: fiat money; U.S. currency: commodity money
Gold coins: commodity money; redeemable paper: representative money; U.S. currency: fiat money
Gold coins: fiat money; redeemable paper: commodity money; U.S. currency: representative money
Gold coins: representative money; redeemable paper: commodity money; U.S. currency: fiat money
A bank customer moves funds from a checking account to a savings account. Using the definitions of M1 and M2, how does this action change the measures of money supply, assuming the amount stays within the banking system?
M1 increases and M2 decreases because savings are near money
M1 decreases while M2 stays the same because funds shift from transactions money to near money
Both M1 and M2 increase because deposits grow when transferred
Neither M1 nor M2 changes because savings are not counted in money supply
Economists note that about half of transactions money consists of currency and half consists of demand deposits. Which scenario best illustrates a demand deposit being converted into currency, consistent with the description of M1?
A customer withdraws cash from a checking account at an ATM
A worker sets up direct deposit to a savings account
A shopper pays with a credit card that will be billed later
An investor buys a certificate of deposit with a one-year term
A government debates whether to return to a money system where paper notes can be exchanged for a fixed amount of metal stored by the state. Based on the described types of money, what change would this represent for the national currency?
Switching from fiat money to commodity money backed by goods in daily use
Switching from fiat money to representative money backed by stored metal
Switching from representative money to fiat money controlled by supply regulation
Switching from commodity money to fiat money that has value only by government decree
Study the visual showing three items: a U.S. one-dollar bill, two cows near a fence, and two large seashells. Which item is an example of currency in the modern economy?
The pair of cows near a fence
The two large seashells
The U.S. one-dollar bill
A handwritten IOU note
Using the same visual of a dollar bill, cows, and seashells, which item is the least portable as a form of money and why? Choose the best option that reflects both identification and reasoning.
The dollar bill, because it is easily damaged and hard to verify
The cows, because they are bulky, living assets that are difficult to transport
The seashells, because they are rare and cannot be carried in quantity
None of the items; all are equally portable
All three items pictured—the dollar bill, cows, and seashells—have been used as money in different contexts. Which economic property most plausibly enabled each to function as money across contexts?
Divisibility: each can be split into equal parts without losing value
Durability: each lasts indefinitely without deterioration
Acceptability: people agree to take them in exchange for goods and services
Uniformity: each item is identical in all cases
