In: Economics
2. Which of the following is an example of barter?
A. A homeowner gives an exterminator a check for $50 in exchange
for extermination services.
B. A barber gives a plumber a haircut in exchange for the plumber
fixing the barber’s leaky faucet.
A. You sell your old lawnmower at a yard sale and the buyer gives
you $40 in payment for it.
D. All of the above are examples of barter.
E. None of them are examples of barter.
3. Which of the following statements is (are) correct?
(x) If you mark the prices of shirts at your clothing store in
dollars you are using money as a unit of account
(y) When you pay for your food at the restaurant with currency you
are utilizing the medium of exchange function of money.
(z) Any item that people can use to transfer purchasing power from
the present to the future is called a store of value
A. (x), (y), and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only
4. Which of the following best illustrates the concept of a store
of value?
A. You shop at Dollar General because you think it is a store of
value.
B. You sell items on eBay, and your prices are stated in terms of
dollars.
C. You keep a very large jar of quarters, dimes, nickels and
pennies in your bedroom closet.
D. You are a precious-metals dealer, and you are always aware of
how many ounces of platinum trade for an ounce of gold.
E. None of the above is correct because none of them are a store of
value.
2. Which of the following is an example of barter?
A. A homeowner gives an exterminator a check for $50 in exchange
for extermination services. - No because the homeowner is paying
for the services and using money as medium of exchange. In barter
system there is exchange of goods and services without any third
medium of exchange. Here, there is payment for services but there
is no exchange of services.
B. A barber gives a plumber a haircut in exchange for the
plumber fixing the barber’s leaky faucet. - There is
exchange of services here. Barber is exchanging his hair cut
service with the plumber's plumbing services. One is providing
service in exchange of another service and there is no other third
medium of exchange(like money). This is barter.
C. You sell your old lawnmower at a yard sale and the buyer gives
you $40 in payment for it- This is sale and not barter. Barter
refers to exchange of a good or service with another good or
service and not payments in terms of money.
3. Which of the following statements is (are) correct?
(x) If you mark the prices of shirts at your clothing store in
dollars you are using money as a unit of account- Correct because
when shirts are sold, payments would come in the form of money. The
value of shirts are defined in terms of money here and we would use
it to account for profits, loss and worth of the shirts.
(y) When you pay for your food at the restaurant with currency you
are utilizing the medium of exchange function of money- Correct
because money is used to intermediate the exchange of goods and
services and hence performing a function as a medium of exchange.
Here for food, we are paying in terms of money and money is serving
as a medium to buy food.
(z) Any item that people can use to transfer purchasing power from
the present to the future is called a store of value - Correct
because to act as a store of value, money must be reliably saved,
stored, and retrieved. It must be predictably usable as a medium of
exchange when it is retrieved. Additionally, the value of money
must remain stable over time.And in this statement when we transfer
purchasing power from present to future means that we transfer the
ability to purchase in the future which is usable in future.
A. (x), (y), and (z)
4. Which of the following best illustrates the concept of a
store of value?
A. You shop at Dollar General because you think it is a store of
value - The day to day household items are no assets that could be
used to trade in future or to buy something else in exchange.
B. You sell items on eBay, and your prices are stated in terms of
dollars - Its a sale process and there is no saving for future. Its
is money serving as a unit of account where items are valued in
terms of money.
C. You keep a very large jar of quarters, dimes, nickels
and pennies in your bedroom closet. - The quarters, dimes, nickles
and pennies are all forms of money which could be used anytime in
future for usable purposes.
D. You are a precious-metals dealer, and you are always aware of
how many ounces of platinum trade for an ounce of gold- This is
knowledge of the business but it does not specify that dealer is
saving or keeping any metal for future use
E. None of the above is correct because none of them are a store of
value.
A store of value, means a item that you can not only be used to trade but also to store it for future use.A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. Example - money, currency, or a commodity like a precious metal or financial capital.