Econ 301 Exam 2025 Questions and
Answers
commodity money - --CORRECT ANSWER--a good used as money that also has
value independent of its use as money
fiat money - --CORRECT ANSWER--money, such as paper currency, that has no
value apart from its use as money
medium of exchange - --CORRECT ANSWER--something that is generally
accepted as payment for goods and services; a function of money
Explain the primary force behind the evolution of the form money - --CORRECT
ANSWER--- In early economies individuals would often exchange goods and
services by trading output directly with each other. This is a Barter economy
- There are four main sources of inefficiency in barter,
1. The time and effort spent to find a trading partner (Double coincidence of
wants)
2. Under Barter each good has many prices ( N(N-1)/2)
3. Lack of standardization ( All pigs and cows are not the same)
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, 4. Difficulty of accumulating wealth
- The inefficiencies of barter forced people to be self-sufficient. To improve on
barter, people had an incentive to identify a specific product that most people
would accept as a medium of exchange. This is called commodity money. This
caused transaction costs to decrease and people can now take advantage of
specialization.
barter economy - --CORRECT ANSWER--a system of exchange by which goods
or services are directly exchanged for other goods or services without using a
medium of exchange, such as money
transaction costs - --CORRECT ANSWER--the costs in time or other resources
that parties incur in the process of agreeing and carrying out an exchange of goods
and services
Four key functions of money - --CORRECT ANSWER--1. It acts as a medium of
exchange
2. It is a unit of account
3. It is a store of value
4. it offers a standard of deferred payment
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
Answers
commodity money - --CORRECT ANSWER--a good used as money that also has
value independent of its use as money
fiat money - --CORRECT ANSWER--money, such as paper currency, that has no
value apart from its use as money
medium of exchange - --CORRECT ANSWER--something that is generally
accepted as payment for goods and services; a function of money
Explain the primary force behind the evolution of the form money - --CORRECT
ANSWER--- In early economies individuals would often exchange goods and
services by trading output directly with each other. This is a Barter economy
- There are four main sources of inefficiency in barter,
1. The time and effort spent to find a trading partner (Double coincidence of
wants)
2. Under Barter each good has many prices ( N(N-1)/2)
3. Lack of standardization ( All pigs and cows are not the same)
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, 4. Difficulty of accumulating wealth
- The inefficiencies of barter forced people to be self-sufficient. To improve on
barter, people had an incentive to identify a specific product that most people
would accept as a medium of exchange. This is called commodity money. This
caused transaction costs to decrease and people can now take advantage of
specialization.
barter economy - --CORRECT ANSWER--a system of exchange by which goods
or services are directly exchanged for other goods or services without using a
medium of exchange, such as money
transaction costs - --CORRECT ANSWER--the costs in time or other resources
that parties incur in the process of agreeing and carrying out an exchange of goods
and services
Four key functions of money - --CORRECT ANSWER--1. It acts as a medium of
exchange
2. It is a unit of account
3. It is a store of value
4. it offers a standard of deferred payment
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
