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ECO 4223 CH 2 VOCAB QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECO 4223 CH 2 VOCAB QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECO 4223 CH 2 VOCAB QUESTIONS ANDANSWERS WITH SOLUTIONS 2024
Money - ANSWER is an asset that is generally accepted as payment for goods and services or repayment
of debt
income - ANSWER flow of earnings overtime
wealth - ANSWER value of assets minus liabilities
3 characteristics of money - ANSWER means of payment, unit of account, store of value
barter - ANSWER in which a good or service is exchanged directly for another good or service "double
coincidence of wants" not good for the economy
money: means of payment - ANSWER money finalizes payments so that buyers and sellers have no
further claim on each other
money: unit of account (standard of value) - ANSWER money is the unit of account that we use to quote
prices and record debts
prices provide the information consumers and producers use to ensure resources are allocated to their
best use
makes comparison of relative value of goods and services easier
money: store of value - ANSWER must retain its worth from day to day; not perishable and more likely to
be accepted for transactions
has to be durable and capable of transferring purchasing power fro one day to the next
money is more liquid than other assets (such as stocks, bonds, etc.)
, paper currency - ANSWER does degrade with use but regardless of its physical condition, it is usually
accepted at face value in transactions
first issued in 1670 by Sweden John Palmstruck of the private Stockholm Banco
paper currency was redeemable for precious metal held in the bank
liquidity - ANSWER is a measure of the ease with which an asset can be turned into a means of payment
the more costly the conversion, the more liquid the asset
market liquidity - ANSWER ability to sell assets for money
funding liquidity - ANSWER ability to borrow money to buy securities or make loans
The payments system - ANSWER is a web of arrangements that allow for the exchange of goods and
services, as well as assets, among different people
1. commodity and fiat money
2. checks
3. electronic payments
the efficient operation depends on this system
money is the heart of the payments system
payments system: commodity and fiat money - ANSWER intrinsic value
commodity monies - ANSWER any commodity that is accepted as a means of payment
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