Question 1

After you finish your degree, suppose your salary is $52,000 per year. This is an example of money as

Accepted Answer

Money as a unit of account is used to measure the value of goods and services in the economy. In this case, the salary of $52,000 is being measured in terms of money as a unit of account.

Question 2

Suppose that you find out from an L.L. Bean catalogue that a sweater costs $30.00. In this case, money is serving as a

Accepted Answer

Money is serving as a unit of account in this scenario, as it is being used to measure the value of the sweater in dollars.

Question 3

Matthew purchases a candy bar with his allowance. This purchase represents using money as

Accepted Answer

Using money as a medium of exchange means exchanging money for goods or services, which is exactly what Matthew is doing when he purchases a candy bar. Money serves as a convenient medium to facilitate this transaction. Money as a store of value refers to the ability to save money for future purchases or investments, which is not relevant in this scenario. Money as a unit of account refers to measuring the value of goods and services in a standardized way, which is not directly relevant to Matthew's candy bar purchase.

Question 4

Cigarettes served as money in some POW camps during World War II. Given this fact, we would expect to observe

Accepted Answer

If cigarettes were used as money, we would expect to see prices of other goods expressed in terms of cigarettes, just as we see prices of goods expressed in terms of dollars or other currencies.

Question 5

Which of the following applies to the use of money as a unit of account?
I.A unit of account is an agreed measure for stating the prices of goods and services.
II.Using money as a unit of account creates a simplified pricing system.
III.Economies choose many goods as units of account.

Accepted Answer

Money functions as a unit of account by serving as an agreed measure for stating the prices of goods and services, which simplifies the pricing system. Unlike many goods that can act as units of account, money is widely accepted in economies. Therefore, both statements I and II accurately apply to the use of money as a unit of account, while statement III is untrue.

Question 6

Barter is an inefficient means of exchange because

Accepted Answer

Barter transactions require a double coincidence of wants, meaning that two parties must each possess something that the other wants in order for a transaction to occur. This can make it difficult for people to find suitable trading partners and can lead to inefficiencies in the exchange process.

Question 7

When you toss your spare quarters into a jar so you can use them later at the laundromat, you are using money in its function as a

Accepted Answer

When you toss your spare quarters in a jar to use later, you are essentially using the jar as a store of value. Money serves as a store of value because it can be saved and used in the future, which is what you are doing with the quarters.

Question 8

Catherine compares the prices of candy bars in order to get the "best buy." This comparison represents using money as a

Accepted Answer

The comparison of candy bar prices to get the "best buy" represents using money as a unit of account, which is the function of money that measures the value of goods and services in terms of a common unit.

Question 9

As a unit of account, money is used to

Accepted Answer

Money is commonly used as a standard unit of account, which means it is used to express the price of goods and services. It allows for easy comparison of different products and helps in determining the relative value of different items.

Question 10

Suppose prices are quoted in dollars and transactions are conducted in pesos. The dollar serves as a

Accepted Answer

When prices are quoted in dollars, the dollar is being used as a unit of account. This means it is the standard numerical unit of measurement of the market value of goods, services, and other transactions. Even though transactions are conducted in pesos, the dollar is the reference for pricing, making it the unit of account.

Question 11

When you bought your textbook for this course, you were using money as a

Accepted Answer

When the student bought the textbook, they were using money as a medium of exchange, as they were using it to exchange for the textbook. Money as a store of value would refer to using money as a way to store purchasing power over time, which is not applicable in this scenario. Money as a price mechanism would refer to the role of money in determining prices within an economy, which is also not relevant in this particular transaction. Money as a unit of account would refer to using money as a standard measurement of the value of goods and services, which is not the primary purpose of money in this case.

Question 12

Suppose prices are quoted in dollars and transactions are conducted in pesos. The peso serves as a

Accepted Answer

When transactions are conducted in pesos, it means the peso is being used to facilitate trade or purchases, which is the definition of a medium of exchange.

Question 13

Which of the following is an example of using money as a store of value?

Accepted Answer

Keeping $200 on hand for an emergency is an example of using money as a store of value, as the money is being saved for future use rather than immediately spent on a purchase.

Question 14

A unit of account

Accepted Answer

A unit of account is an agreed measure for stating the prices of goods and services in an economy. It provides a standard measurement of value that facilitates commercial transactions and economic calculations. While it is related to the accounting of how many currency units there are in an economy, it is not the same thing. It is also not an accounting of the total units of goods and services produced in an economy, nor is it a type of value stored within all assets.

Question 15

Frank spends Saturday afternoon at the Dodge dealership looking at new trucks. The model that he is interested in has a sticker price of $29,000. The fact that the price is quoted in dollars is an example of money used as a

Accepted Answer

The fact that the price is quoted in dollars makes it an example of money being used as a unit of account. While money can also serve as a medium of exchange and a store of value, the question specifically asks about what the fact that the price is quoted in dollars represents.

Question 16

In a world with no money, costs are expressed in terms of other goods. If one video game costs two hamburgers, and a hamburger costs three sodas, how many sodas would it take to buy a video game?

Accepted Answer

Since one video game costs two hamburgers and one hamburger costs three sodas, to buy one video game, it would take 2 hamburgers * 3 sodas per hamburger = 6 sodas.

Question 17

During periods of inflation, which function of money is most severely affected?

Accepted Answer

During periods of inflation, the value of money decreases over time, resulting in a decrease in its ability to serve as a store of value. This means that individuals and businesses may be hesitant to hold onto their money in cash or savings accounts, as they will lose purchasing power over time. Instead, they may choose to invest in assets such as stocks or real estate, which are often seen as better stores of value during periods of inflation.

Question 18

Money as a medium of exchange
I.facilitates the exchange of goods.
II.reduces or eliminates the need for barter.

Accepted Answer

Money serves as a medium of exchange, making it easier to purchase goods and services without having to resort to the barter system. By using money, people can exchange goods for currency, which can then be used to buy other goods or services. This eliminates the need for a direct exchange of goods or services, making transactions more efficient and practical.

Question 19

Which function of money represents a measure for stating the prices of goods and services?

Accepted Answer

The function of money that represents a measure for stating the prices of goods and services is called the unit of account. This means that money serves as a standard unit for measuring the value of goods and services.

Question 20

A $25,000 price tag on a new car is an example of money as

Accepted Answer

The $25,000 price tag on a new car is an example of money as a unit of account because it is being used as a standard measure for pricing and comparing the value of goods and services. It is not an example of money as a medium of exchange (used for transactions), a store of value (held for future use), or a time deposit (a type of savings account with a fixed term and interest rate).

Quiz 8: Money, the Price Level, and Inflation