Question 1

In World War II,cigarettes were used as money in some prisoner of war camps.Given this,we would expect to see
A) no-one ever smoking cigarettes in the prisoner of war camps.
B) prices of other goods expressed in terms of cigarettes.
C) only government-issued cigarettes being accepted as money.
D) people bartering instead of using cigarettes as money.

Accepted Answer

When cigarettes are used as a form of currency, it is typical to see prices of other goods expressed in terms of cigarettes. This allows for easier exchange and comparison of the value of goods in relation to the currency being used. While there may have been restrictions on certain types of cigarettes, it is not necessarily the case that only government-issued cigarettes would be accepted. Bartering may still occur, but cigarettes would likely be the primary means of exchange due to their widespread use as currency. It is also possible that some individuals may have continued to smoke cigarettes despite their use as currency, but this would not necessarily negate their value as a form of exchange.

Question 2

A unit of account is
A) a standard unit that provides a consistent way of quoting prices.
B) an asset that can be used to transport purchasing power from one period of time to another.
C) what sellers generally accept and buyers generally use to pay for goods and services.
D) the ability to buy something today but to defer payment to the future.

Accepted Answer

A unit of account is a standardized way of measuring the value of goods and services. It provides a consistent way of quoting prices and has no inherent value of its own.

Question 3

Which of the following is not a function of money?
A) Medium of exchange
B) Unit of account
C) Store of value
D) Standard of barter

Accepted Answer

Money serves as a medium of exchange, which means it facilitates transactions between buyers and sellers. It is also a unit of account, meaning it is used to measure the value of goods and services. Additionally, money is a store of value, meaning it can be saved and used in the future. However, money is not a standard of barter, as barter refers to exchanging goods or services without the use of money.

Question 4

The statement 'a Dell laptop costs $1600' illustrates which function of money?
A) Medium of exchange
B) Unit of account
C) Store of value
D) Standard of deferred payment

Accepted Answer

The statement 'a Dell laptop costs $1600' illustrates the use of money as a unit of account, as the dollar amount is being used to assign a value to the laptop.

Question 5

Commodity money is
A) a good used as money that has no secondary use.
B) a good that is designated as money by law.
C) a good used as money that also has value independent of its use as money.
D) a good used as money that has no intrinsic value.

Accepted Answer

Commodity money is a good used as money that also has value independent of its use as money. This means that the commodity used as money has some intrinsic value, such as gold or silver, and can be used for other purposes besides being a medium of exchange. Commodity money has been widely used in the past and is still used in some cases today.

Question 6

A person wanting the most liquid asset possible will hold
A) a demand deposit account.
B) Australian government bonds.
C) currency.
D) gold.

Accepted Answer

Currency is the most liquid asset as it can be used immediately for transactions without any conversion or delay.

Question 7

A disadvantage of using money as a store of value is that
A) money is not portable.
B) it requires a double coincidence of wants.
C) currency is intrinsically worthless.
D) the value of money falls when the prices of goods and services rise.

Accepted Answer

The value of money as a store of value decreases with inflation, as the prices of goods and services rise. This means that if someone saves money for the future, its purchasing power may decrease over time.

Question 8

A major source of inefficiency in barter economies is that they require
A) a standard of deferred payment to make trade possible.
B) a double coincidence of wants in exchange.
C) more liquid stores of value than do monetary economies.
D) All of these options are correct.

Accepted Answer

Barter economies require a double coincidence of wants in exchange - this means that in order for a trade to take place, both parties must have something that the other wants. This can make trading inefficient as finding someone who has what you want and wants what you have can be difficult and time-consuming. Standard of deferred payment and liquidity of stores of value are not major sources of inefficiency in barter economies, so choices A and C are incorrect. Therefore, the best choice is B.

Question 9

During World War II,prisoners of war used ________ as money.
A) bullets
B) cowrie shells
C) chocolate
D) cigarettes

Accepted Answer

During World War II, cigarettes were commonly used as currency among prisoners of war. This was due to the high demand and scarcity of cigarettes in prison camps.

Question 10

When a grocery store accepts your $10 note in exchange for bread and milk,this illustrates that the $10 note is serving as a
A) medium of exchange.
B) unit of account.
C) store of value.
D) standard of deferred payment.

Accepted Answer

The use of the $10 note to purchase bread and milk demonstrates that it is being used as a medium of exchange, which is one of the key functions of money.

Question 11

By making exchange ________,money allows for ________ and higher ________.
A) harder; specialisation; costs
B) easier; specialisation; productivity
C) harder; generalisation; productivity
D) easier; specialisation; costs

Accepted Answer

By making exchange easier, money facilitates specialization, which leads to increased productivity.

Question 12

The problem with barter economies is that they require
A) less time and trouble to trade as compared with a money economy.
B) that there be a double coincidence of wants.
C) a banking system for trade to occur.
D) that there be a single coincidence of wants.

Accepted Answer

Barter economies require that there be a double coincidence of wants, meaning both parties in a transaction must have something the other desires. This can make trading difficult and lead to inefficiencies. A banking system or a single coincidence of wants are not necessary for trade in a barter economy. Option A is incorrect because barter economies can actually be more time-consuming and troublesome than using money.

Question 13

If you save $3000 for a deposit on a new car,you are using money as a
A) medium of exchange.
B) unit of account.
C) store of value.
D) standard of deferred payment.

Accepted Answer

Saving $3000 for a deposit on a new car is using money as a store of value, as you are holding onto the money for a future purchase.

Question 14

Liquidity is defined as the ease with which a given asset can be converted to a
A) store of value.
B) unit of account.
C) medium of exchange.
D) standard of deferred payment.

Accepted Answer

Liquidity refers to the ability of an asset to be easily converted into cash or used to facilitate transactions as a medium of exchange. Therefore, option C, medium of exchange, is the correct answer. Options A, B, and D refer to different functions of money and are not directly related to liquidity.

Question 15

A farm worker gets paid today in money,but waits to spend the money until next week.Which function of money does this illustrate?
A) Medium of exchange
B) Unit of account
C) Store of value
D) Standard of deferred payment

Accepted Answer

This illustrates the function of money as a store of value since the worker is holding onto the money for a period of time before spending it.

Question 16

Money is
A) an asset that people are generally willing to accept in exchange for goods and services.
B) a liability that people are willing to accept in exchange for goods and services.
C) the income a person earns over a period of time.
D) a person's assets net of liabilities at any point in time.

Accepted Answer

Money is an asset that is commonly accepted in exchange for goods and services, making it a medium for transactions. It has value because people trust that it can be used to purchase goods or services or to pay off debts. Therefore, option A is the best choice.

Question 17

Which of the following is the most liquid asset?
A) A Monet painting
B) Bonds
C) A car
D) A $20 note

Accepted Answer

The $20 note is the most liquid asset as it can be easily and quickly converted into cash without any significant loss in value. The Monet painting may take time to find a buyer willing to pay a fair price, while bonds may need to be sold on a secondary market and may not immediately provide cash. The car is also not a liquid asset as it may take time to find a buyer and negotiate a price.

Question 18

The liquidity property of money is the property that makes money
A) a good store of value and a good unit of account.
B) a good medium of exchange and a good store of value.
C) a good medium of exchange and a good unit of account.
D) a good store of value and a good standard of deferred payment.

Accepted Answer

The answer of The liquidity property of money is the...

Question 19

Many international trade contracts are denominated in United States dollars,regardless of the currencies of the countries that are trading with each other.This is an example of money serving as a
A) unit of account.
B) medium of exchange.
C) store of value.
D) standard of deferred payment.

Accepted Answer

A unit of account is a measure used to value goods and services in an economy. In this case, the United States dollar is being used as the measure or unit of account for the international trade contracts. It is important to note that while the United States dollar serves as the unit of account in these contracts, it may not necessarily be used as the medium of exchange or store of value in the actual trading transactions.

Question 20

A barter economy is an economy where
A) goods and services are exchanged for money.
B) money is exchanged for goods and services.
C) goods and services are exchanged for other goods and services.
D) goods and services are exchanged for liabilities.

Accepted Answer

In a barter economy, there is no currency or money used to exchange goods and services. Instead, individuals and businesses trade goods and services for other goods and services. For example, a farmer may exchange produce with a carpenter who needs to fix their barn. This type of economy existed before the invention of money and is still used in some cases today, such as local market trading or informal exchanges.

Quiz 15: Aggregate Demand and Aggregate Supply Analysis

In World War II,cigarettes were used as money in some prisoner of war camps.Given this,we would expect to see

A unit of account is

Which of the following is not a function of money?

The statement 'a Dell laptop costs $1600' illustrates which function of money?

Commodity money is

A person wanting the most liquid asset possible will hold

A disadvantage of using money as a store of value is that

A major source of inefficiency in barter economies is that they require

During World War II,prisoners of war used ________ as money.

When a grocery store accepts your $10 note in exchange for bread and milk,this illustrates that the $10 note is serving as a

By making exchange ,money allows for and higher .

The problem with barter economies is that they require

If you save $3000 for a deposit on a new car,you are using money as a

Liquidity is defined as the ease with which a given asset can be converted to a

A farm worker gets paid today in money,but waits to spend the money until next week.Which function of money does this illustrate?

Money is

Which of the following is the most liquid asset?

The liquidity property of money is the property that makes money

Many international trade contracts are denominated in United States dollars,regardless of the currencies of the countries that are trading with each other.This is an example of money serving as a

A barter economy is an economy where