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Money&Banking Essay

3131 words - 13 pages

Problem Sheet | The Economics of Money, Banking & Financial Markets |
2014 | Ch 3 Sheet 3 |
Instructor: Hala A. Fares | Tutor: Sarah Mostafa |

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) To an economist, ________ is anything that is generally accepted in payment for goods and services or in the repayment of debt. 1) _______

A) credit B) money C) wealth D) income

2) Money is 2) _______
A) a flow of earnings per unit of time.
B) anything that is generally accepted in payment for goods and services or in the repayment of debt.
C) always based on a precious metal like gold or silver.
D) the total collection of pieces of ...view middle of the document...

B) money is a flow and income is a stock.
C) there is no differencemoney and income are both stocks.
D) there is no differencemoney and income are both flows.

11) Which of the following is a true statement? 11) ______
A) Income is a flow variable. B) Money and income are stock variables.
C) Money is a flow variable. D) Money and income are flow variables.

12) Which of the following statements uses the economists' definition of money? 12) ______
A) Betsy is richshe has a lot of money.
B) I hope that I have enough money to buy my lunch today.
C) The job with New Company gave me the opportunity to earn more money.
D) I plan to earn a lot of money over the summer.

13) Of money's three functions, the one that distinguishes money from other assets is its function as a 13) ______
A) store of value. B) medium of exchange.
C) standard of deferred payment. D) unit of account.

14) If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are 14) ______
A) money. B) bank deposits. C) reserves. D) loanable funds.

15) ________ are the time and resources spent trying to exchange goods and services. 15) ______
A) Bargaining costs. B) Contracting costs.
C) Transaction costs. D) Barter costs.

16) Compared to an economy that uses a medium of exchange, in a barter economy 16) ______
A) transaction costs are higher. B) liquidity costs are higher.
C) liquidity costs are lower. D) transaction costs are lower.

17) When compared to exchange systems that rely on money, disadvantages of the barter system include: 17) ______

A) lowering the cost of exchanging goods over time.
B) the requirement of a double coincidence of wants.
C) encouraging specialization and the division of labor.
D) lowering the cost of exchange to those who would specialize.

18) The conversion of a barter economy to one that uses money 18) ______
A) increases efficiency by reducing the need to exchange goods and services.
B) does not increase economic efficiency.
C) increases efficiency by reducing transactions costs.
D) increases efficiency by reducing the need to specialize.

19) Which of the following statements best explains how the use of money in an economy increases economic efficiency? 19) ______

A) Money cannot have an effect on economic efficiency.
B) Money increases economic efficiency because it discourages specialization.
C) Money increases economic efficiency because it decreases transactions costs.
D) Money increases economic efficiency because it is costless to produce.

20) When economists say that money promotes ________, they mean that money encourages specialization and the division of labor. 20) ______

A) greed B) bargaining C) efficiency D) contracting

21) Money ________ transaction costs, allowing people to specialize in what they do best. 21) ______
A) eliminates B) increases C) enhances D) reduces

22) For a commodity to function effectively as money it must be 22) ______
A) deteriorate quickly so that its supply does not...

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