Terminologies Engineering Economics: Chapter 1
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Questions and Answers

What is fiat money?

  • Government-issued currency not backed by any physical commodity (correct)
  • Money derived from its inherent worth as a physical commodity
  • Government-issued currency backed by a physical commodity like gold or silver
  • Physical token representing a claim to an underlying valuable asset

    • Which type of money is directly usable for trade or industry beyond its monetary function?

  • Credit Money
  • Commodity Money (correct)
  • Fiat Money
  • Representative Money

    • What is the value of representative money initially backed by?

  • Government bonds
  • Precious metals like gold or silver (correct)
  • Physical token representing a claim to an underlying valuable asset
  • Future payments arising from credit extensions

    • What is the interest?

    <p>Money paid for the use of borrowed capital or the income produced by money loaned</p> Signup and view all the answers

    Which type of money includes checks, promissory notes, and credit cards?

    <p>Credit Money</p> Signup and view all the answers

    What is the main difference between Ordinary Simple Interest and Exact Simple Interest?

    <p>The basis of 360 days a year for Ordinary Simple Interest and 365 days for Exact Simple Interest</p> Signup and view all the answers

    What is the difference between Nominal Rate of Interest and Effective Rate of Interest?

    <p>Nominal Rate considers the actual rate of interest, while Effective Rate considers the number of interest periods in one year</p> Signup and view all the answers

    What does Continuous Compounding of Interest assume?

    <p>Cash payments occur once a year, but the compounding is continuous throughout the year</p> Signup and view all the answers

    What is the main characteristic of Perpetuity?

    <p>The payments occur indefinitely</p> Signup and view all the answers

    What is the key feature of Annuity Due?

    <p>It requires payments to be made at the beginning of each period</p> Signup and view all the answers

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