Q1) When we think about money, most of us think of the paper and coin currency t
ID: 1101635 • Letter: Q
Question
Q1) When we think about money, most of us think of the paper and coin currency that we use to make exchanges in the marketplace. However, "money" has a much richer definition for economists, and it works in the economy to provide important functions.
When we say that a pair of shoes costs $20, we use money as a:
A. Medium of exchange
B. Unit of account
C. Store of value
Q2) Which of the following statements help to explain why the Reserve Bank of Australia cannot precisely control the money supply? Check all that apply.
- The Reserve Bank of Australia cannot control the amount of money that households choose to hold as currency.
- The Reserve Bank of Australia cannot control the amount of reserves Australian banks hold.
-The Reserve Bank of Australia can require a particular percentage of current deposits be held as reserves.
Q3) Winona owns and operates a bookshop in a country experiencing a high rate of inflation. Each day, some of her employees spend time tracking changes in the overall price level and changing the price tags within the shop and the price lists on the shop's wesbite. This is an exmple of the ________________ of inflation.
a. unit of account costs b. menu costs c. shoe leather costs
Explanation / Answer
1.) B. Unit of account
2.) The Reserve Bank of Australia cannot control the amount of money that households choose to hold as currency.
The Reserve Bank of Australia cannot control the amount of reserves Australian banks hold. (excess reserves)
3.) Menu costs
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