C7.pdf - 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 3. In economics, moneyrefers to 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
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. 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? 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

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