AP Macroeconomics Money UPDATED
ACTUAL Questions and CORRECT
Answers
money - CORRECT ANSWER - Any asset that can be exchanged easily for a good or
service
what functions does money serve in an economy? - CORRECT ANSWER - - store of
value
- medium of exchange
- unit of measure
store of value - CORRECT ANSWER - money holds value over time
medium of exchange - CORRECT ANSWER - money can be exchanged for goods and
services
- prevents the double coincidence of wants that occurs from bartering
- money holds purchasing power
unit of measure - CORRECT ANSWER - money can be counted and its value can be
recorded easily
double coincidence of wants - CORRECT ANSWER - - money eliminates this issue by
eliminating the need for barter: a system of exchange where two parties exchange a good or
service without the use of money
- This co-incidence depends on both parties wanting the same thing and that each is of equivalent
value to the other
- the use of money gets rid of this need and as a result makes for a much more smoothly
operating economy
, what are the different types of money? - CORRECT ANSWER - - commodity money
- commodity-backed money
- fiat money
commodity money - CORRECT ANSWER - ex. gold, livestock, cigarettes, etc...
commodity-backed money - CORRECT ANSWER - ex. Gold standard - every dollar in
circulation has an equivalent value in gold
fiat money - CORRECT ANSWER - money that is backed by the issuer (bank of Canada)
- paper money
- money has no intrinsic value since it's only paper
how do we value money in the economy? - CORRECT ANSWER - - price of money
relative to goods
- price of money relative to time
- price of money relative to foreign currency
price of money relative to goods - CORRECT ANSWER - purchasing power
price of money relative to time - CORRECT ANSWER - interest rates (nominal)
price of money relative to foreign currency - CORRECT ANSWER - exchange rates
increase in money supply = - CORRECT ANSWER - - inflation (price level increases and
decreases purchasing power)
- decreased interest rate
- decreased exchange rate
ACTUAL Questions and CORRECT
Answers
money - CORRECT ANSWER - Any asset that can be exchanged easily for a good or
service
what functions does money serve in an economy? - CORRECT ANSWER - - store of
value
- medium of exchange
- unit of measure
store of value - CORRECT ANSWER - money holds value over time
medium of exchange - CORRECT ANSWER - money can be exchanged for goods and
services
- prevents the double coincidence of wants that occurs from bartering
- money holds purchasing power
unit of measure - CORRECT ANSWER - money can be counted and its value can be
recorded easily
double coincidence of wants - CORRECT ANSWER - - money eliminates this issue by
eliminating the need for barter: a system of exchange where two parties exchange a good or
service without the use of money
- This co-incidence depends on both parties wanting the same thing and that each is of equivalent
value to the other
- the use of money gets rid of this need and as a result makes for a much more smoothly
operating economy
, what are the different types of money? - CORRECT ANSWER - - commodity money
- commodity-backed money
- fiat money
commodity money - CORRECT ANSWER - ex. gold, livestock, cigarettes, etc...
commodity-backed money - CORRECT ANSWER - ex. Gold standard - every dollar in
circulation has an equivalent value in gold
fiat money - CORRECT ANSWER - money that is backed by the issuer (bank of Canada)
- paper money
- money has no intrinsic value since it's only paper
how do we value money in the economy? - CORRECT ANSWER - - price of money
relative to goods
- price of money relative to time
- price of money relative to foreign currency
price of money relative to goods - CORRECT ANSWER - purchasing power
price of money relative to time - CORRECT ANSWER - interest rates (nominal)
price of money relative to foreign currency - CORRECT ANSWER - exchange rates
increase in money supply = - CORRECT ANSWER - - inflation (price level increases and
decreases purchasing power)
- decreased interest rate
- decreased exchange rate
