15 Questions
What is the primary function of money according to the text?
To act as a store of value
Which type of money has high intrinsic value, according to the text?
Gold coins
What determines the money supply (Ms) of an economy, according to the text?
Monetary authorities
In a barter economy, what is used for trade instead of money?
Goods directly exchanged for other goods
What is the primary difference between fiat money and commodity money, according to the text?
Fiat money is widely accepted for trade
What is the Cambridge equation used to represent?
Money demand function
According to the dichotomy principle, what do nominal and real variables do?
Affect each other independently
What does the neutrality of money imply in the long run?
Money supply changes only affect nominal variables
In the context of money neutrality, what does the dichotomy principle help to simplify?
Macroeconomic models
What does the neutral money assumption imply for changes in the money supply?
Lead to corresponding changes in real output
What phenomenon can lead to the neutrality of money and the dichotomy principle not holding in the long run?
All of the above
What does the nominal exchange rate represent?
The number of foreign currency units per domestic unit
What does appreciation of the nominal exchange rate signify?
An increase in the value of the domestic currency
What is the concept of hysteresis effects relevant to?
Economic production growth
What is the primary function of a free banking system according to the text?
Issuing coins and banknotes
Test your understanding of the definition of money and its functions as a medium of exchange and store of value. This quiz explores the concept of money as a means to facilitate trade and its various forms, including coins, banknotes, and electronic records.
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