Money serves three functions in the economy: medium of exchange, unit of account, and store of value. Which of the following statements describes how inflation affects the ability of money to serve as a unit of account? Check all that apply. Inflation erodes money's purchasing power. ✔In some countries with hyperinflation, prices are posted in terms of U.S. dollars rather than the local currency, even though the local currency is still used to purchase the good. Inflation causes menu costs.

Money serves three functions in the economy: medium of exchange, unit of account, and store of value. Which of the following statements describes how inflation affects the ability of money to serve as a unit of account? Check all that apply. Inflation erodes money's purchasing power. ✔In some countries with hyperinflation, prices are posted in terms of U.S. dollars rather than the local currency, even though the local currency is still used to purchase the good. Inflation causes menu costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Money serves three functions in the economy: medium of exchange, unit of account, and store of value. Which of the following statements describes how inflation affects the ability of money to serve as a unit of account? Check all that apply. In some countries with hyperinflation, prices are posted in terms of U.S. dollars rather than the local currency, even though the local currency is still used to purchase the good. Inflation erodes money's purchasing power. Inflation causes menu costs.
Which of the following will cause the demand curve for money to shift to the right? (a) An increase in real Gross Domestic Product (GDP).(b) A decrease in the repo rate.(c) An increase in the quantity of money available.(d) A decrease in the quantity of money available.
If the money supply (M) is $300, the real GDP (Q) is 200, the velocity of money (V) is 6, the interest rates is 5% and the inflation rate is 3%, then calculate nominal GDP.
Which of the following statements represent a use of money that is not consistent with its definition? "I got some money at the ATM with my debit card," "I just used my credit card as money to buy a new television." "I wrote a check on my deposit account to pay for dental services." "I will accept either currency or gold as money for the purchase of my house."
In a less-developed economy, cattle is widely accepted as payment for goods and services. Nearly all goods and services are priced in terms of cattle; however, cows vary in quality, become less valuable with age, and are difficult to move over long distances. Which of the following functions of money do cattle provide? Select the two correct answers. portability uniformity medium of exchange unit of account store of value
In general, when there is less competition in the banking sector ( a lower supply of firms), nominal interests rates decrease, which makes it easier for business owners to obtain a loan. inflation decreases, which is better for the economy as a whole. nominal interest rates increase, which is good for businesses. nominal interest rates increase, making it more difficult for business owners to obtain loans, which is bad for the economy as a whole.
Which of the following does not describe hyperinflation?Select one:A) . During a hyperinflation people often try to shift to a "hard" currency issued by another country.B) Hyperinflation is often defined as an annual inflation rate higher than 100 percent.C) Germany, Hungary, Bolivia, Ukraine, Venezuela, and Zimbabwe have experienced hyperinflation in the last 100 years.D) . During a hyperinflation people tend to resort to barter to avoid dealing with rapidly inflating currency.E) The purchasing power of money increases dramatically during hyperinflation.
Recently the economic conditions of the country have been weakened. Even though inflation has not increased in the last year. Price of crude oil on the international market has increased by 15% last month. As a measure in controlling inflation in the country, the Monetary Policy Committee (MPC) of the Bank of Ghana has decided to restrict the supply of money and increase the target policy rate by 100 basis points (1%) Required:a. As a finance student, do you support the decision made by the monetary committee? Explain (not exceeding 6 lines of explanation).b. Explain how prices of debt securities would change in response to this policy? (not exceeding 6 lines of explanation) c. Assume the Monetary Policy Committee decides to reduce the target policy rate by 1.5% today and this decision is not backed by any financial market expectations. Will this change in policy directive affect yields paid by firms when they issue corporate bonds? Explain your answer.d. In the last month, the 91day…
The value of money is measured by a) dollars, just like all other prices in the economy b) some form of currency, depending on the currency circulating in the economy c) nominal interest rates d) units of output, such as goods and services e) the money supply, which is the quantity of dollars in circulation
(Q#5) The economy has fallen into a "double dip" recession and national production (GDP) in real terms begins to decline. This will: [a] reduce the demand for money and place downward pressure on interest rates [b] increase the demand for money and place upward pressure on interest rates (Q#6) The supply chain failures in combination with expansionary monetary policy by the FED has created high price inflation and greater expectations of future price inflation. These inflation developments will: [a] reduce the demand for money and place downward pressure on interest rates [b] increase the demand for money and place upward pressure on interest rates
How does the concept of commodity money differ from fiat money, and what are the advantages and disadvantages of each? A) Commodity money is paper currency with no intrinsic value, while fiat money is backed by tangible assets like gold; advantages of commodity money include stability, while disadvantages include limited supply. B) Commodity money is backed by tangible assets like gold, while fiat money has no intrinsic value; advantages of fiat money include flexibility, while disadvantages include the potential for inflation. C) Commodity money is a type of cryptocurrency, while fiat money refers to physical currency. D) Commodity money and fiat money are identical concepts with no differences.
The price level tends increase over time, therefore it follows that: a) money is a good medium of exchange. b) money (currency and checkable deposits) is the most liquid part of the money supply. c) money is an imperfect store of value.