Money and Interest Rates 2 Lecture Outline Quiz
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Questions and Answers

What are the three functions of money?

  • Medium of exchange, barter system, investment tool
  • Savings account, checking account, currency exchange
  • Medium of exchange, unit of account, store of value (correct)
  • Credit card, debit card, cash

    • What is the definition of 'medium of exchange'?

  • An asset that holds wealth
  • A measure of economic value
  • A direct trade of goods and services for other goods and services
  • An asset used in purchasing goods and services (correct)

    • What is the definition of 'unit of account'?

  • A direct trade of goods and services
  • A measure of wealth
  • An asset used in purchasing goods and services
  • A basic measure of economic value (correct)

    • What is the definition of 'store of value'?

    <p>An asset that serves as a mean of holding wealth</p> Signup and view all the answers

    Why is the function of money as a medium of exchange crucial?

    <p>It suppresses the problem of double coincidence of wants</p> Signup and view all the answers

    Study Notes

    Functions of Money

    • Money serves three primary functions: medium of exchange, unit of account, and store of value.

    Medium of Exchange

    • Definition: A medium of exchange is an item that is widely accepted in exchange for goods and services.
    • Enables individuals to trade goods and services with one another, facilitating economic activity.
    • Crucial function because it allows for specialization and division of labor, increasing productivity and efficiency.

    Unit of Account

    • Definition: A unit of account is a standard unit of measurement for the value of goods and services.
    • Enables the valuation and comparison of different goods and services.
    • Provides a common language for expressing prices and conducting transactions.

    Store of Value

    • Definition: A store of value is an item that retains its value over time, allowing individuals to save and invest for the future.
    • Enables individuals to defer consumption and allocate resources across different time periods.
    • Helps to reduce uncertainty and promotes long-term economic growth.

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    Description

    Test your knowledge of money and interest rates with this quiz. Explore topics such as the demand for money, the supply of money, and how central banks control the money supply and interest rates.

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