ECON201 Chapter 10 Exam Questions With Complete Solutions

ECON201 Chapter 10 Exam Questions With Complete Solutions Money is A) the same as income. B) anything that is generally accepted as a medium of exchange. C) the value of all coins and currency in circulation at any time. D) backed by gold in Fort Knox. - CORRECT ANSWER B Any transaction that involves exchanging one good for another without using money is considered a A) liquidity transaction. B) barter transaction. C) deferred payment. D) black market exchange. - CORRECT ANSWER B Jacob makes excellent tamales and Amanda is very good at mowing lawns. Amanda agrees to mow Jacob'ʹs lawn, if he makes her a dozen tamales. This is an example of A) legal tender. B) barter. C) commodity money. D) fiat money. - CORRECT ANSWER B Which of the following factors causes the barter system to be inefficient? A) Its cost of transaction is too low. B) The cost associated with information search is too low. C) It requires a double coincidence of wants. D) It requires high liquidity. - CORRECT ANSWER C Josie wants to trade swimming lessons for cooking lessons. Maria wants to trade cooking lessons for swimming lessons. Josie and Maria have A) the basis for a liquidity exchange. B) a double incidence of demand. C) the basis for a double fiat exchange. D) a double coincidence of wants. - CORRECT ANSWER D The development of money as a medium of exchange has facilitated the expansion of trade because A) holding money increases people'ʹs wealth. B) holding money increases people'ʹs income. C) money eliminates the "ʺdouble coincidence of wants"ʺ problem. D) no other mediums of exchange are available. - CORRECT ANSWER C When money is used as a medium of exchange A) the need for a barter system diminishes. B) the cost of transactions increases. C) the need for a banking system in the economy decreases. D) it reduces the number of transactions in the economy. - CORRECT ANSWER A Betty won $500 in a poker tournament. She deposits her $500 winnings into a money market fund so that she can use the money next year to help her pay for a trip to Las Vegas. This is an example of money serving as a(n) A) unit of account. B) medium of exchange. C) store of value. D) investment good. - CORRECT ANSWER C