10 Questions
What is the term for the requirement in a barter economy where a trader must find another trader willing to trade what the first trader wants and wants what the first trader has?
Double Coincidence of Wants
Which function of money refers to the ability of an item to hold value over time?
Store of Value
What is the narrow definition of the money supply, consisting of the most liquid forms of money?
M1
What is the broad measure of the money supply, consisting of small-denomination time deposits and retail money market mutual funds?
M2
What is the term for anything that is generally acceptable in exchange for goods and services?
Medium of Exchange
What is the term for a type of bank account that allows the account holder to write checks or drafts against the account balance?
Checkable deposit
Which one of the following is a function of money that refers to a common measure in which relative values are expressed?
Unit of account
In a barter economy, what does the term 'Double Coincidence of Wants' specify?
The requirement for a trade to occur
What is the term for the broad measure of the money supply, consisting of small-denomination time deposits and retail money market mutual funds?
M2
What is the term for coins and paper money that are legal tender and creditors are required to accept them as payment?
Currency
Study Notes
Barter Economy and Functions of Money
- In a barter economy, the "Double Coincidence of Wants" specifies the requirement for a trader to find another trader willing to trade what the first trader wants and wants what the first trader has.
- The ability of an item to hold value over time is referred to as the "store of value" function of money.
Money Supply
- The narrow definition of the money supply, known as M1, consists of the most liquid forms of money.
- The broad measure of the money supply, known as M2, consists of small-denomination time deposits and retail money market mutual funds.
Characteristics of Money
- Anything that is generally acceptable in exchange for goods and services is referred to as "medium of exchange".
- The function of money that refers to a common measure in which relative values are expressed is known as the "unit of account".
Types of Bank Accounts
- A type of bank account that allows the account holder to write checks or drafts against the account balance is known as a "checking account".
Forms of Money
- Coins and paper money that are legal tender and creditors are required to accept them as payment are referred to as "fiat money".
Test your knowledge of economic concepts with this quiz on the functions of money. Explore the roles of money as a medium of exchange, unit of account, and store of value, as well as the concept of barter. See how well you understand these fundamental aspects of monetary systems.
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