This document of ECO 316 Week 1 Chapter 2 Money and the Payments System shows the solutions to the following problems:

2.1 Multiple Choice Questions

1) Many economists argue that the gain to European countries from all of them using the same currency

2) The common currency in Europe is called the

3) When was the common European currency introduced?

4) Movements in the money supply are associated with

5) The most important reason why economies at an early stage of development tend to operate inefficiently is that

6) By “specialization” economists mean a situation where

7) The most important economic benefit from specialization is that it

8) When an economy relies on specialization,

9) Fundamentally, to reap the benefits of specialization, an economy must

10) Barter is

11) Under a system of barter

12) Which of the following is an example of a barter transaction?

13) In a barter system individuals

14) A system of barter has substantial transactions costs because

15) Under a barter system

16) How many prices would there be in a barter economy with 10 goods?

17) The problem of a double coincidence of wants refers to

18) Andy can’t make a deal with Danny. Andy has a Barry Bonds baseball card and would like to trade it to Danny for Danny’s Albert Pujols card, but Danny doesn’t want a Barry Bonds card. Andy’s problem illustrates the drawback to a barter system known as

19) Which of the following is NOT a significant cost that a barter system imposes on an economy?

20) The collapse of economic systems in Eastern Europe during the late 1980s reveals that

21) Which of the following is NOT true of allocating goods and services through a system of government rationing?

22) Which of the following is the most efficient means of trade?

23) Money eliminates the need for

24) Money is a medium of exchange in that

25) Money as a medium of exchange refers only to

26) Which of the following will lead to the most benefit in terms of greater prosperity?

27) Using a good as a medium of exchange confers the benefit that

28) When economists refer to the role of money as a unit of account, they mean that

29) When economists refer to the role of money as a store of value, they mean that

30) An asset is

31) The attribute that distinguishes money from other assets is that only money

32) Wealth is

33) The difference between money and income is that whereas income is an individual’s

34) Which of the following is NOT a stock?

35) In comparing money to shares of General Motors stock, we can say that

36) Why do individuals hold money when it does not provide the services that, say, a house does?

37) Other assets are inferior to money in the sense that

38) When economists refer to the role of money as a standard of deferred payment, they mean that

39) The purchasing power of money

40) When prices rise, the purchasing power of money

41) If the value of money increases over time, then we know

42) Suppose $100 buys less in the year 2007 than in 2000. Then we can say that

43) Eight cents earned in 1940 would have been able to buy goods and services worth how much today?

44) A hyperinflation occurs when

45) The experience of Argentina in the late 1980s illustrates the point that

46) A “price index” is a

47) Which of the following is NOT an important criterion for whether a good will be usable as a medium of exchange?

48) Which criterion for suitability as a medium of exchange do Federal Reserve Notes meet?

49) What determines the acceptability of dollar bills as a medium of exchangeECO 316 Week 1 Chapter 6 Determining Market Interest Rates,Economics,$12.99,

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