Fintech Slides Intro - Lec 3 (New 2026/
2027 Update) Questions & Answers {Grade
A} 100% Correct (Verified Solutions)
Barter - Correct answer Double Coincidence Problem: In a barter economy there is no
money for transactions. Without money, it would be difficult for people to trade with
each other. If you produce apples and you want to trade for eggs, you must find a
producer of eggs who wants apples. This problem is called the double coincidence of
wants.
Money as One Side of Trade - Correct answer Money, as a medium of exchange, is
used to solve the double coincidence problem and make transactions easier and more
efficient. It can be viewed as a lending tool.
Money serves as generalized purchasing power: sellers are willing to accept money
because they are confident that money can later be used to buy what they want.
As a result, a monetary economy makes it easier for people to specialize in producing
certain goods.
Forms of Money - Correct answer Commodity money
,Convertible fiat money
True fiat money with no intrinsic value
Digital money (including Cryptocurrencies)
Commodity Money - Correct answer Commodity money has intrinsic value. The best
example is gold. Gold used to serve as money because it was intrinsically valuable.
When people traded their goods for gold, it was necessarily because they wanted gold;
rather, it was more often because they believed that they could buy things they wanted
with gold.
That is, gold has the "generalized purchasing power."
Other examples: chickens, eggs, shells, cigarettes
Convertible Fiat Money - Correct answer Convertible Fiat Money: Paper money backed
by a certain commodity, such as gold and silver. The paper titles to the commodity
were exchanged, not the commodity itself.
,The gold standard: the government guarantees that paper money can be exchanged for
a specified amount of gold. In this sense, the paper money backed by gold was still a
kind of "commodity money."
Fiat Money with no Intrinsic Value - Correct answer Fiat money: money that has no
intrinsic value, such as the dollar bills in our wallets, is known as fiat money.
Fiat money is just a piece of paper that is not backed by any commodity.
Fiat Money with no Intrinsic Value - Correct answer Legal tender laws: The
government mandates that dollar bills must be accepted as a way of payment.
In a fiat money system, people accept money because they believe it will function as
generalized purchasing power, not because the government mandates that the money
is legal tender.
, In other words, the value of money comes from the faith that it will be accepted by
everyone else.
Fiat Money with no Intrinsic Value - Correct answer legal tender laws can not really
compel people to accept money; they can always choose not to sell or sell for an
astronomical amount of money.
When there is hyperinflation, people no longer have faith in money, and money
becomes worthless pieces of paper.
Digital Money - Correct answer Digital money is a type of currency available only in
digital form, not in physical (such as banknotes and coins).
It is accounted for and transferred using computers. (Money is just a number)
Digital Money is a balance recorded electronically on a stored-value card or other
device, such as internet.
2027 Update) Questions & Answers {Grade
A} 100% Correct (Verified Solutions)
Barter - Correct answer Double Coincidence Problem: In a barter economy there is no
money for transactions. Without money, it would be difficult for people to trade with
each other. If you produce apples and you want to trade for eggs, you must find a
producer of eggs who wants apples. This problem is called the double coincidence of
wants.
Money as One Side of Trade - Correct answer Money, as a medium of exchange, is
used to solve the double coincidence problem and make transactions easier and more
efficient. It can be viewed as a lending tool.
Money serves as generalized purchasing power: sellers are willing to accept money
because they are confident that money can later be used to buy what they want.
As a result, a monetary economy makes it easier for people to specialize in producing
certain goods.
Forms of Money - Correct answer Commodity money
,Convertible fiat money
True fiat money with no intrinsic value
Digital money (including Cryptocurrencies)
Commodity Money - Correct answer Commodity money has intrinsic value. The best
example is gold. Gold used to serve as money because it was intrinsically valuable.
When people traded their goods for gold, it was necessarily because they wanted gold;
rather, it was more often because they believed that they could buy things they wanted
with gold.
That is, gold has the "generalized purchasing power."
Other examples: chickens, eggs, shells, cigarettes
Convertible Fiat Money - Correct answer Convertible Fiat Money: Paper money backed
by a certain commodity, such as gold and silver. The paper titles to the commodity
were exchanged, not the commodity itself.
,The gold standard: the government guarantees that paper money can be exchanged for
a specified amount of gold. In this sense, the paper money backed by gold was still a
kind of "commodity money."
Fiat Money with no Intrinsic Value - Correct answer Fiat money: money that has no
intrinsic value, such as the dollar bills in our wallets, is known as fiat money.
Fiat money is just a piece of paper that is not backed by any commodity.
Fiat Money with no Intrinsic Value - Correct answer Legal tender laws: The
government mandates that dollar bills must be accepted as a way of payment.
In a fiat money system, people accept money because they believe it will function as
generalized purchasing power, not because the government mandates that the money
is legal tender.
, In other words, the value of money comes from the faith that it will be accepted by
everyone else.
Fiat Money with no Intrinsic Value - Correct answer legal tender laws can not really
compel people to accept money; they can always choose not to sell or sell for an
astronomical amount of money.
When there is hyperinflation, people no longer have faith in money, and money
becomes worthless pieces of paper.
Digital Money - Correct answer Digital money is a type of currency available only in
digital form, not in physical (such as banknotes and coins).
It is accounted for and transferred using computers. (Money is just a number)
Digital Money is a balance recorded electronically on a stored-value card or other
device, such as internet.
