Question : 11) An example of the use of money as a : 1384440

11) An example of the use of money as a medium of exchange is:

A) Dave keeps $250 in his drawer for a “rainy day.”

B) Mike gets a friend to give him a beer today in return for promising to give the friend two beer when Mike gets paid at the end of the month.

C) Judy lends her car to a friend who signs a promissory note that she will pay Judy $10 a day for the use of the car after she returns the car to Judy.

D) Barry pays $275 with his bank debit card for tickets for an NHL play-off game.

E) ABC Investments Inc. enters in its account books that it owes Nallai $20 for his last month’s investment income.

12) If a majority of Canadian households and businesses refused to accept Canadian dollars in exchange for goods and services, the value of the Canadian dollar would

A) fall.

B) rise since less would be in circulation.

C) stay constant since the value does not depend on its acceptability by people.

D) stay constant since its value is determined only by the Bank of Canada.

E) stay constant since its value is determined only by the Government of Canada.

13) In order for money to be successfully used as a medium of exchange, it must

1) be readily acceptable;

2) be easily divisible;

3) have a high value-weight ratio.

A) 1 only

B) 2 only

C) 3 only

D) 1 and 2

E) 1, 2, and 3

14) The use of money in an economy does which of the following?

A) creates the necessity for a double coincidence of wants

B) solves the problem of inflation

C) creates a problem of trading a portion of indivisible commodities such as a ship

D) promote specialization and the division of labour

E) promotes the use of barter

15) When metal coins, such as gold and silver, were used as money, a technique which helped to prevent the reduction of their value through clipping was

A) basing.

B) re-minting.

C) milling.

D) debasement.

E) sweating.

16) Historically, when gold and silver coins were used as money, their debasement resulted in

A) deflation

B) an increase in the supply of money.

C) an increase in the amount of gold bullion.

D) an increase in the desire to store wealth by holding coins.

E) a decrease in the money supply.

17) Gresham’s law predicts that

A) good money drives out bad money.

B) debased money will circulate with undebased money.

C) undebased money will be driven from circulation.

D) debased money will be driven from circulation.

E) money is neutral in the long run.

18) Which of the following is consistent with the predictions of Gresham’s law?

A) An increase in the money supply will be followed by inflation.

B) The increased circulation of U.S. coins in Canada during periods when the Canadian dollar is worth significantly less than the U.S. dollar.

C) Debasement of a metallic money will be followed by inflation.

D) Increases in the money supply led to the hyperinflation of the 1920s in Germany.

E) The disappearance of U.S. coins circulating in Canada during periods when the Canadian dollar is worth less than the U.S. dollar.

19) Suppose you come into possession of two “silver” dollars, one minted in the 1950s which contains a lot of silver, the other minted in the 1990s which contains no silver at all. The legal exchange rate between the coins is fixed at one for one. According to Gresham’s law, the 1950s silver dollar

A) is considered “bad” money.

B) will drive out of circulation the 1990s silver dollar.

C) is more likely to be used as a medium of exchange.

D) is less likely to be used as a medium of exchange.

E) is less likely to be used as a store of value because it will appear old fashioned.

20) Which of the following was the most important initial step in the evolution of paper currency?

A) the acceptance of bank notes

B) the acceptance of goldsmiths’ receipts

C) the acceptance of metallic coins

D) the issuance of currency by governments

E) the use of the Gold Standard