ANSWER OUTLINE
ECONOMICS 353 (SECTION 2) L. Tesfatsion/Spring 99
EXERCISE SET 3: 5 POINTS TOTAL DUE: Tuesday, February 9, 2:10 P.M.
*IMPORTANT REMINDER: LATE ASSIGNMENTS CANNOT BE ACCEPTED -- NO EXCEPTIONS*
Please FILL IN YOUR NAME on Side 1 of the accompanying General Purpose
NCS Answer Sheet and use a #2 pencil to MARK YOUR ANSWERS on Side 1 of this
Answer Sheet to the following five multiple choice questions. [If you missed
class and did not receive an answer sheet, you can pick one up at the office
of my secretary, Sue Streeter, in Heady Hall 382 (4-6600).]
1-2. When compared to exchange systems that rely on money, disadvantages
of the barter payment system include:
A A. the requirement of a double coincidence of wants
B. lowering the cost of exchanging goods over time
C. encouragement of specialization (division of labor)
D. all of the above
2-2. If there are four goods in a barter economy (i.e., an economy in which
no money is used), then one needs to know six prices in order to exchange one
good for another. If, however, there are five goods in a barter economy, one
needs to know ______ prices in order to exchange one good for another.
A. 8
B. 9
C C. 10
D. 12
3-2. Which of the following assets would NOT be included in a theoretical
approach to the measurement of the money supply:
A. currency
B. traveler's checks
C. checking account deposits
D D. corporate bonds
4-2. People hold money even during high inflation when other assets are
better stores of value. This can be explained by the fact that money
A. is increasing in value
B B. is the most liquid medium of exchange
C. is legal tender and hence must be used in goods and services exchanges
D. is highly durable
5-2. Recent financial innovations involving the creation of new secondary
markets for securities make attempts to define satisfactory measures of
money more difficult because
A. money is no longer as important to the economy
B B. the range of assets with money-like characteristics has increased
C. information on transactions in these new secondary markets is not
publicly released
D. these new secondary markets tend to cause inflation
