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AP Macroeconomics: Money Exam
Questions and Answers 100% Pass
money - ✔✔Any asset that can be exchanged easily for a good or service
what functions does money serve in an economy? - ✔✔- store of value
- medium of exchange
- unit of measure
store of value - ✔✔money holds value over time
medium of exchange - ✔✔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 - ✔✔money can be counted and its value can be recorded easily
double coincidence of wants - ✔✔- 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? - ✔✔- commodity money
Emily Charlene © 2025, All Rights Reserved.
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- commodity-backed money
- fiat money
commodity money - ✔✔ex. gold, livestock, cigarettes, etc...
commodity-backed money - ✔✔ex. Gold standard - every dollar in circulation has an equivalent value in
gold
fiat money - ✔✔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? - ✔✔- 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 - ✔✔purchasing power
price of money relative to time - ✔✔interest rates (nominal)
price of money relative to foreign currency - ✔✔exchange rates
increase in money supply = - ✔✔- inflation (price level increases and decreases purchasing power)
- decreased interest rate
- decreased exchange rate
decrease in money supply = - ✔✔- deflation (price level falls and increases purchasing power)
- increased interest rate
- increased exchange rate
Emily Charlene © 2025, All Rights Reserved.
AP Macroeconomics: Money Exam
Questions and Answers 100% Pass
money - ✔✔Any asset that can be exchanged easily for a good or service
what functions does money serve in an economy? - ✔✔- store of value
- medium of exchange
- unit of measure
store of value - ✔✔money holds value over time
medium of exchange - ✔✔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 - ✔✔money can be counted and its value can be recorded easily
double coincidence of wants - ✔✔- 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? - ✔✔- commodity money
Emily Charlene © 2025, All Rights Reserved.
, 2|Page
- commodity-backed money
- fiat money
commodity money - ✔✔ex. gold, livestock, cigarettes, etc...
commodity-backed money - ✔✔ex. Gold standard - every dollar in circulation has an equivalent value in
gold
fiat money - ✔✔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? - ✔✔- 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 - ✔✔purchasing power
price of money relative to time - ✔✔interest rates (nominal)
price of money relative to foreign currency - ✔✔exchange rates
increase in money supply = - ✔✔- inflation (price level increases and decreases purchasing power)
- decreased interest rate
- decreased exchange rate
decrease in money supply = - ✔✔- deflation (price level falls and increases purchasing power)
- increased interest rate
- increased exchange rate
Emily Charlene © 2025, All Rights Reserved.
