EKN 110 EXAM QUESTIONS AND ANSWERS
The 3 basic function of money are - Answer -medium of exchange, unit of account, and
store of value
Rapid inflation can undermine money's ability to perform its functions. During periods of
runaway inflation, - Answer -people often revert to barter because money fails as a
medium of exchange
The invention of money is one of the great achievements of humanity, for without it the
enrichment that comes from broadening trade would have been impossible. This
statement acknowledges that - Answer -without money, trade must occur through
barter, which is inefficient and cumbersome.
Money is whatever society says it is. This statement acknowledges that - Answer -
money must be an acceptable medium for exchange to occur.
In South Africa, the debts of government and commercial banks are used as money.
This statement acknowledges that - Answer -accounts in commercial banks are
customer deposits and thus are debts of commercial banks.
People often say they would like to have more money, but what they usually mean is
that they would like to have more goods and services. This statement acknowledges
that - Answer -money can be used to purchase goods and services, but as an asset
money provides little return
When the price of everything goes up, it is not because everything is worth more but
because the currency is worth less. This statement acknowledges that - Answer -if the
price of everything rises, it means the currency has less purchasing power
Any central bank can create money; the trick is to create enough, but not too much, of it.
This statement acknowledges that - Answer -a central bank can create too much
money, lowering its value and causing inflation
What are the components of the M1 money supply? - Answer -Currency in circulation
and checkable deposits
What is the largest component of M1? - Answer -checkable deposits
Which of the components of M1 is legal tender? - Answer -currency
Why is the face value of a coin greater than its intrinsic value? - Answer -People would
sell it for its intrinsic value
The 3 basic function of money are - Answer -medium of exchange, unit of account, and
store of value
Rapid inflation can undermine money's ability to perform its functions. During periods of
runaway inflation, - Answer -people often revert to barter because money fails as a
medium of exchange
The invention of money is one of the great achievements of humanity, for without it the
enrichment that comes from broadening trade would have been impossible. This
statement acknowledges that - Answer -without money, trade must occur through
barter, which is inefficient and cumbersome.
Money is whatever society says it is. This statement acknowledges that - Answer -
money must be an acceptable medium for exchange to occur.
In South Africa, the debts of government and commercial banks are used as money.
This statement acknowledges that - Answer -accounts in commercial banks are
customer deposits and thus are debts of commercial banks.
People often say they would like to have more money, but what they usually mean is
that they would like to have more goods and services. This statement acknowledges
that - Answer -money can be used to purchase goods and services, but as an asset
money provides little return
When the price of everything goes up, it is not because everything is worth more but
because the currency is worth less. This statement acknowledges that - Answer -if the
price of everything rises, it means the currency has less purchasing power
Any central bank can create money; the trick is to create enough, but not too much, of it.
This statement acknowledges that - Answer -a central bank can create too much
money, lowering its value and causing inflation
What are the components of the M1 money supply? - Answer -Currency in circulation
and checkable deposits
What is the largest component of M1? - Answer -checkable deposits
Which of the components of M1 is legal tender? - Answer -currency
Why is the face value of a coin greater than its intrinsic value? - Answer -People would
sell it for its intrinsic value
