Money Functions Quiz
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Questions and Answers

What is the meaning of the word 'money' derived from?

  • French word monnaie meaning 'currency'
  • German word münze meaning 'mint'
  • Latin word moneta meaning 'coin' (correct)
  • Greek word moneia meaning 'wealth'

    • What are the primary functions that distinguish money?

  • Medium of exchange, unit of account, store of value, standard of deferred payment (correct)
  • Medium of exchange, unit of production, store of value, standard of value
  • Medium of exchange, unit of account, standard of value, standard of deferred payment
  • Medium of exchange, unit of production, store of value, standard of deferred payment

    • What is the basis of nearly all contemporary money systems?

  • Barter system with direct exchange of goods
  • Unbacked fiat money without use value (correct)
  • Gold standard with fixed exchange rates
  • Commodity-backed currency with intrinsic value

    • What does the money supply of a country comprise?

    <p>All currency in circulation and one or more types of bank money</p> Signup and view all the answers

    How is the value of unbacked fiat money derived?

    <p>By social convention and declaration by a government or regulatory entity</p> Signup and view all the answers

    Study Notes

    Origins of Money

    • The word "money" is derived from the Latin word "moneta," which means "mint" or " coin"

    Primary Functions of Money

    • Medium of exchange: enables individuals to trade goods and services
    • Unit of account: serves as a standard unit for measuring the value of goods and services
    • Store of value: allows individuals to save and store value for future use
    • Standard of deferred payment: enables individuals to settle debts and obligations at a future date

    Basis of Contemporary Money Systems

    • Fiat money system: most contemporary money systems are based on fiat money, which has no intrinsic value but is backed by government decree

    Components of the Money Supply

    • Physical currency: coins and banknotes in circulation
    • Digital money: deposits in commercial banks and other financial institutions
    • Central bank reserves: funds held by the central bank to regulate the money supply

    Value of Unbacked Fiat Money

    • Derived from the trust and confidence that individuals and businesses have in the currency
    • Backed by the government's promise to accept it in payment of taxes and debts
    • Maintained by the central bank's management of the money supply and interest rates

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    Description

    Test your knowledge of money and its functions with this quiz. Explore the concepts of medium of exchange, unit of account, store of value, and standard of deferred payment.

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