Chapter 3 - Chapter 3 Exercise: . Key terms 1. Commodity...

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Chapter 3 Exercise: . Key terms 1. Commodity money 2. E-finance 3. E-Cash 4. Fiat Money 5. Hyperinflation 6. Liquidity 7. M1 8. M2 . Multiple Choice 1. Currency includes a. paper money and coins. b. paper money, coins, and checks. c. paper money and checks. d. paper money, coins, checks, and savings deposits. 2. The difference between money and income is that a. money is a flow and income is a stock. b. money is a stock and income is a flow. c. there is no difference—money and income are both stocks. d. there is no difference—money and income are both flows. 3. An individual’s annual salary is her a. money. b. income. c. wealth. d. liabilities. e. assets. 4. A person’s checking deposits are part of her a. money. b. income. c. wealth. d. all of the above. e. only (a) and (c) of the above. 5. Money is a. anything that is generally accepted in payment for goods and services or in the repayment of debt. b. frequently—but incorrectly—used synonymously with wealth. c. a flow of earnings per unit of time. d. all of the above. e. only (a) and (b) of the above. 6. Of money’s three functions, the one that distinguishes money from other assets is
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its function as a a. store of value. b. unit of account. c. standard of deferred payment. d. medium of exchange. 7. When economists say that money promotes efficiency, they mean that money a. increases transactions costs. b. encourages specialization and the division of labor. c. is inexpensive to produce. d. does both (b) and (c) of the above. 8. For a commodity to function effectively as money it must be a. easily standardized, making it easy to ascertain its value. b. widely accepted. c. divisible into relatively small units.
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This note was uploaded on 01/10/2011 for the course FSD 201 taught by Professor Huong during the Spring '10 term at Beacon FL.

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Chapter 3 - Chapter 3 Exercise: . Key terms 1. Commodity...

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