Question

1. What is “money”, exactly?   2. Please name three items that may be used as money, at least in theory, and name two items that could NEVER be used as money. What is the difference between these two groups?   3. What properties and characteristics should any type of money possess in order to be used as money?   4. What three functions should all types of money be able to perform?   5. What is a “barter” transaction, exactly? Please give an example of a barter transaction that was not discussed previously. 6. a) Exactly what is required for a barter transaction to occur? b)   Why do many economists argue that a barter transaction is not as “efficient” as a money-based transaction?   7. Please describe the concept of “counterfeit” and give an example of a situation involving this concept. 8. What is “hyperinflation”, exactly? Why must every country’s government worry about it? Give an example of hyperinflation: why is it so harmful to a nation’s economy and its people?   9. What is a bank, exactly? What does a bank do, exactly? 10. “A bank is just like any other corporation doing business in America—like Ford, or Target”… WHY IS THIS STATEMENT UNTURE??? WHAT IS SO SPECIAL ABOUT BANKS????? 1 What is the definition of the term “the REAL rate of interest” or “the REAL interest rate”? 12. What are three of the terrible harms caused by ten percent annual (yearly) inflation rates? Which groups in our economy are hardest hit by 10% inflation? Why?
2. What is “money”, exactly?   2. Please name three items that may be used as money, at least in theory, and name two items that could NEVER be used as money. What is the difference between these two groups?   3. What properties and characteristics should any type of money possess in order to be used as money?   4. What three functions should all types of money be able to perform?   5. What is a “barter” transaction, exactly? Please give an example of a barter transaction that was not discussed previously. 6. a) Exactly what is required for a barter transaction to occur? b)   Why do many economists argue that a barter transaction is not as “efficient” as a money-based transaction?   7. Please describe the concept of “counterfeit” and give an example of a situation involving this concept. 8. What is “hyperinflation”, exactly? Why must every country’s government worry about it? Give an example of hyperinflation: why is it so harmful to a nation’s economy and its people?   9. What is a bank, exactly? What does a bank do, exactly? 10. “A bank is just like any other corporation doing business in America—like Ford, or Target”… WHY IS THIS STATEMENT UNTURE??? WHAT IS SO SPECIAL ABOUT BANKS????? 1 What is the definition of the term “the REAL rate of interest” or “the REAL interest rate”? 12. What are three of the terrible harms caused by ten percent annual (yearly) inflation rates? Which groups in our economy are hardest hit by 10% inflation? Why?

Answer 1

Q1) Money is any item or records that is acceptable for payment of goods and services or repayment of debts in any socio-economic context.

Q2) Items usable as money are : currency notes, gold, metal coins

Items that can not be used are: houses, land

The major difference between these is that items that can be used as money are easy to carry and divisible so=uch that they can be readily used for even the smallest transactions

Q3) Money should be readily acceptable by the public, easy to store, easy to carry, divisible.

Q4) Three functions are: Medium of exchange, store of value, unit of account.

Q5) Barter transaction is one where goods are exchnaged for goods. For instance, I give you 10 shep an dyou give me 2kg of rice.

Q6) (a) Barter system requires a double coincidence of wants. Both the people must be wanting the goods that are possessed by one another.

(b) Barter system is inefficient as satisfying the double coincidence of wants is difficult. I might not want the good that you have but you may want the good that I have. It is also difficult to measure the value of one good in terms of another. Making transactions is also difficult as goods have to be carried physically