macro95ex7 - Chapter 7 The Asset Market, Money, and Prices...

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Chapter 7 The Asset Market, Money, and Prices T Multiple Choice Questions 1. A disadvantage of the barter system is that (a) no trade occurs. (b) people must produce all their own food, clothing, and shelter. (c) the opportunity to specialize is greatly reduced. (d) gold is the only unit of account. Answer: C Level of difficulty: 1 Section: 7.1 2. The use of money is more efficient than barter because the introduction of money (a) reduces the need for economic specialization. (b) reduces the need to exchange goods. (c) reduces the need for other stores of value. (d) reduces transaction costs. Answer: D Level of difficulty: 1 Section: 7.1 3. In economics, money refers to (a) income. (b) wealth. (c) assets used and accepted as payment. (d) currency. Answer: C Level of difficulty: 1 Section: 7.1 4. Money’s primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization. This function of money is called (a) store of value. (b) medium of exchange. (c) standard of deferred payment. (d) unit of account. Answer: B Level of difficulty: 1 Section: 7.1
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Chapter 7 The Asset Market, Money, and Prices 103 5. In some countries, prices in stores are listed in terms of U.S. dollars, rather than in units of the local currency. That’s most likely because (a) the country’s political system is unstable. (b) interest rates are higher using U.S. dollars than using the local currency. (c) there is no other store of value. (d) the country has experienced high rates of inflation. Answer: D Level of difficulty: 1 Section: 7.1 6. A good that is used as a medium of exchange as well as being a consumption good is called (a) a barter money. (b) a commodity money. (c) a legal tender. (d) a debased money. Answer: B Level of difficulty: 1 Section: 7.1 7. Why do people keep currency in their pockets when bank deposits pay interest? (a) Because banks might steal your money. (b) Because currency is more liquid. (c) Because bank deposits lose value due to inflation. (d) Because bank deposits lose value due to changes in interest rates. Answer: B Level of difficulty: 1 Section: 7.1 8. One of money’s primary roles in the economy comes from the use of money to transfer purchasing power to the future. This role of money is called (a) store of value. (b) unit of account. (c) medium of exchange. (d) standard of deferred payment. Answer: A Level of difficulty: 1 Section: 7.1 9. Which of the following measures is the best measure of money as a medium of exchange? (a) M1 (b) M2 (c) M3 (d) None of the above Answer: A Level of difficulty: 1 Section: 7.1
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104 Abel/Bernanke • Macroeconomics, Fifth Edition 10. Suppose your bank raises its minimum-balance requirement for free checking on checking accounts by $500. You take $500 out of your passbook savings account and put it in your checking account.
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macro95ex7 - Chapter 7 The Asset Market, Money, and Prices...

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