Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 3 What Is Money?
3.1 Meaning of Money
1) To an economist, ________ is anything that is generally accepted in payment for goods and services or in the repayment of debt. A) wealth B) income C) money D) credit Answer: C
AACSB: Application of Knowledge
2) Money is
A) anything that is generally accepted in payment for goods and services or in the repayment of debt.
B) a flow of earnings per unit of time.
C) the total collection of pieces of property that are a store of value. D) always based on a precious metal like gold or silver. Answer: A
AACSB: Application of Knowledge
3) Currency includes
A) paper money and coins.
B) paper money, coins, and checks. C) paper money and checks.
D) paper money, coins, checks, and savings deposits. Answer: A
AACSB: Analytical Thinking
4) Even economists have no single, precise definition of money because A) money supply statistics are a state secret.
B) the Federal Reserve does not employ or report different measures of the money supply. C) the \
D) economists find disagreement interesting and refuse to agree for ideological reasons. Answer: C
AACSB: Reflective Thinking
5) The total collection of pieces of property that serve to store value is a person's A) wealth. B) income. C) money. D) credit. Answer: A
AACSB: Application of Knowledge 6) A person's house is part of her A) money.
B) income. C) liabilities. D) wealth. Answer: D
AACSB: Analytical Thinking
7) ________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value. A) Money; income B) Wealth; income C) Income; money D) Money; wealth Answer: D
AACSB: Reflective Thinking
8) ________ is a flow of earnings per unit of time. A) Income B) Money C) Wealth D) Currency Answer: A
AACSB: Application of Knowledge
9) An individual's annual salary is her A) money. B) income. C) wealth. D) liabilities. Answer: B
AACSB: Analytical Thinking
10) When we say that money is a stock variable, we mean that A) the quantity of money is measured at a given point in time. B) we must attach a time period to the measure. C) it is sold in the equity market.
D) money never loses purchasing power. Answer: A
AACSB: Reflective Thinking
11) The difference between money and income is that A) money is a flow and income is a stock. B) money is a stock and income is a flow.
C) there is no difference—money and income are both stocks. D) there is no difference—money and income are both flows. Answer: B
AACSB: Reflective Thinking
12) Which of the following is a TRUE statement? A) Money and income are flow variables. B) Money is a flow variable. C) Income is a flow variable.
D) Money and income are stock variables. Answer: C
AACSB: Reflective Thinking
13) Which of the following statements uses the economists' definition of money? A) I plan to earn a lot of money over the summer. B) Betsy is rich—she has a lot of money.
C) I hope that I have enough money to buy my lunch today.
D) The job with New Company gave me the opportunity to earn more money. Answer: C
AACSB: Analytical Thinking
3.2 Functions of Money
1) Of money's three functions, the one that distinguishes money from other assets is its function as a
A) store of value. B) unit of account.
C) standard of deferred payment. D) medium of exchange. Answer: D
AACSB: Reflective Thinking
2) If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts are
A) bank deposits. B) reserves. C) money.
D) loanable funds. Answer: C
AACSB: Reflective Thinking
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