EKN 110 QUESTIONS &
ANSWERS(RATED A+)
The 3 basic function of money are - ANSWERmedium of exchange, unit of account,
and store of value
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 - ANSWERmoney 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 - ANSWERif
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 - ANSWERa central bank can create too
much money, lowering its value and causing inflation
Rapid inflation can undermine money's ability to perform its functions. During periods
of runaway inflation, - ANSWERpeople 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 - ANSWERwithout money, trade must occur through
barter, which is inefficient and cumbersome.
Money is whatever society says it is. This statement acknowledges that -
ANSWERmoney 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 - ANSWERaccounts in commercial banks are
customer deposits and thus are debts of commercial banks.
What are the components of the M1 money supply? - ANSWERCurrency in
circulation and checkable deposits
What is the largest component of M1? - ANSWERcheckable deposits
Which of the components of M1 is legal tender? - ANSWERcurrency
Why is the face value of a coin greater than its intrinsic value? - ANSWERPeople
would sell it for its intrinsic value
ANSWERS(RATED A+)
The 3 basic function of money are - ANSWERmedium of exchange, unit of account,
and store of value
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 - ANSWERmoney 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 - ANSWERif
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 - ANSWERa central bank can create too
much money, lowering its value and causing inflation
Rapid inflation can undermine money's ability to perform its functions. During periods
of runaway inflation, - ANSWERpeople 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 - ANSWERwithout money, trade must occur through
barter, which is inefficient and cumbersome.
Money is whatever society says it is. This statement acknowledges that -
ANSWERmoney 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 - ANSWERaccounts in commercial banks are
customer deposits and thus are debts of commercial banks.
What are the components of the M1 money supply? - ANSWERCurrency in
circulation and checkable deposits
What is the largest component of M1? - ANSWERcheckable deposits
Which of the components of M1 is legal tender? - ANSWERcurrency
Why is the face value of a coin greater than its intrinsic value? - ANSWERPeople
would sell it for its intrinsic value
