When compared to exchange systems that rely on money, disadvantages of the barter system include:

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lowering the cost of exchange to those who would specialize. encouraging specialization and the division of labor. the requirement of a double coincidence of wants. lowering the cost of exchanging goods over time. The conversion of a barter economy to one that uses money
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increases efficiency by reducing the need to specialize. increases efficiency by reducing the need to exchange goods and services. does not increase economic efficiency. increases efficiency by reducing transactions costs.

Because it is a unit of account, money

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increases transaction costs. discourages specialization. reduces the number of prices that need to be calculated. does not earn interest.

Of the following assets, the least liquid is

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traveler's checks. stocks. a house.

checking deposits. The components of the U.S. M1 money supply are demand and checkable deposits plus
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currency plus travelers checks plus money market deposits. currency plus travelers checks. currency. currency plus savings deposits. A person's house is part of her
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income . liabilitie s. money. wealth.

Compared to an economy that uses a medium of exchange, in a barter economy

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transaction costs are higher. liquidity costs are higher. transaction costs are lower. liquidity costs are lower. Of money's three functions, the one that distinguishes money from other assets is its function as a
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standard of deferred payment. unit of account.

medium of exchange. store of value.

If the price level doubles, the value of money

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falls by 50 percent. doubles. rises but does not double, due to diminishing returns. more than doubles, due to scale economies. The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a consequence of
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government regulations designed to improve the efficiency of the payments system. government regulations designed to promote the safety of the payments system. competition among firms to make it easier for customers to purchase their products. innovations that reduced the costs of exchanging goods and services. Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.
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commod ity electroni c funny fiat

Currency includes
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paper money and coins.

paper money, coins, checks, and savings deposits. paper money, coins, and checks. paper money and checks.

________ is the relative ease and speed with which an asset can be converted into a medium of exchange.
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Specializat ion Deflation Efficiency Liquidity

________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.
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Money; income Money; wealth Income; money Wealth; income For a commodity to function effectively as money it must be
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deteriorate quickly so that its supply does not become too large. hard to carry around. easily standardized, making it easy to ascertain its value. difficult to make change.

In a barter economy the number of prices in an economy with N goods is

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[N(N 1)]/2. 2N. N(N/2) 1. N(N/2).

Economists find no completely satisfactory way to measure money because

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the "moneyness" or liquidity of an asset is a matter of degree. money supply statistics are a state secret. the Federal Reserve does not employ or report different measures of the money supply. economists find disagreement interesting and refuse to agree for ideological reasons. The Fed revises its estimates of the monetary aggregates, sometimes by large amounts, because
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weekly monetary data need to be adjusted for the "weekend effect." large depository institutions need only report their deposits infrequently. seasonal adjustments become more precise only as more data becomes available. monthly monetary data need to be adjusted for the "payday effect." If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another.
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2 0 2 5

3 0 4 5 Which of the following is included in both M1 and M2?

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Savings deposits Currency Small-denomination time deposits Money market deposit accounts