RQch13 - CH 13 1.8 a. A medium of exchange refers to...

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CH 13 1.8 a. A medium of exchange refers to anything that is generally accepted in exchange for goods and services. b. Because Roman coins were widely used by the German tribes as they exchanged goods and services, those coins became the German tribes’ medium of exchange. c. A member of a German tribe was willing to accept the Roman coins as long as he or she believed that the coins were acceptable to other people in the tribe. 2.5 Another $20 bill. 2.6 The 1.4 billion pennies in circulation is equivalent to $14 million. If all the pennies were worth five cents each, then M1 would increase by $56 million. Such a change would represent a small fraction in the total value of $1.4 trillion for M1 (see Figure 25-1), and therefore would have a rather small impact on the economy. 3.8 Yes, bank runs would substantially decrease the quantity of money. If banks do not have the funds, they cannot make the loans that create the checking account balances. Moving funds from a checking account to currency in circulation will soon create a multiple
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This note was uploaded on 04/22/2010 for the course ECONOMICS ECON1002 taught by Professor None during the Spring '10 term at Hong Kong Institute of Vocational Education.

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RQch13 - CH 13 1.8 a. A medium of exchange refers to...

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