EC3115: The Nature of Money - Quiz 2

True/False Quiz (50 Questions)

1. In a barter system, storage costs can be considered a type of transaction cost.

2. The Chartalist perspective argues that money must have intrinsic value to be accepted.

3. Deflation increases the effectiveness of money as a store of value.

4. The settlement risk in a debit card transaction is primarily borne by the cardholder's bank.

5. The concept of 'legal tender' is most relevant for commodity money.

6. In the Wicksell problem, the introduction of credit can solve the issue without needing a physical money object, provided there is perfect enforcement of contracts.

7. The cost of producing fiat money is typically higher than its face value.

8. An economy can have a medium of exchange that is not also the unit of account.

9. The finality of payment is identical for a personal cheque and a debit card transaction.

10. The liquidity of an asset is a binary property; an asset is either liquid or it is not.

11. The adoption of a common medium of exchange increases specialization in an economy.

12. 'Outside money' can be created by the lending activities of commercial banks.

13. A credit card transaction reduces the money supply.

14. The 'durability' of money is a more significant problem for commodity monies than for fiat money.

15. The Metallist view of money is consistent with the idea of money emerging spontaneously to solve the inefficiencies of barter.

16. If an economy has 4 goods, a barter system would require 6 unique prices, while a monetary system would require 4.

17. A key function of money is to make the relative values of goods and services more obscure.

18. When a bank loan is repaid, the supply of inside money increases.

19. The fundamental value of fiat money is zero.

20. The Wicksell problem is primarily about the indivisibility of goods.

21. Using a credit card is a way of accessing the economy's medium of exchange at the point of sale.

22. The more liquid an asset is, the higher its expected rate of return.

23. The value of the unit of account is always stable.

24. A bank run is a situation where the Metallist view of money breaks down.

25. The act of quoting all prices in dollars in the US economy illustrates the 'medium of exchange' function of money.

26. The fraud risk in a credit card transaction is initially borne by the merchant.

27. The supply of inside money is independent of the demand for bank loans.

28. Barter requires that the timing of wants must be synchronized between traders.

29. The main liability of a modern central bank is its holdings of government bonds.

30. The 'standard of deferred payment' function of money is irrelevant for short-term contracts.

31. The physical form of money has remained constant throughout history.

32. A key advantage of commodity money is that its value is very stable.

33. When you pay a merchant with a debit card, the merchant receives payment faster than if you had paid with a personal cheque.

34. The quantity of outside money in an economy is determined by the lending decisions of commercial banks.

35. In the Kiyotaki and Moore model, money serves as a form of memory.

36. The transaction costs of barter are independent of the number of goods in the economy.

37. A government budget deficit financed by printing money directly increases the stock of inside money.

38. The interest rate paid on credit card debt is typically lower than the interest rate on a bank savings account.

39. The functions of money are ranked in order of importance, with medium of exchange being the most important.

40. The value of a commodity money is equal to the value of the resources used to produce it.

41. A credit card company's primary asset is the outstanding balances owed by its cardholders.

42. The transition from barter to money increases the total time spent on transactions across the economy.

43. The central bank can perfectly control the amount of inside money in the economy.

44. The 'fungibility' of money is another term for its divisibility.

45. According to the Chartalist view, the state's willingness to accept a token in payment of taxes gives that token value.

46. A debit card is a form of 'inside money'.

47. The problem of indivisibility in barter is most severe for low-value goods.

48. The widespread use of credit cards has made the 'store of value' function of money obsolete.

49. The net worth of the private sector increases when the central bank creates more outside money.

50. The primary risk of holding money is market risk.