Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 17, Problem 3P
To determine
To explain:
Whether it holds true that while choosing between different currencies for transaction,good money drives out bad money.
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Why can fiat money be successfully used as a currency despite the fact that it has no intrinsic value backing it up?
Personal possession of currency is prohibited in U.S. prisons, although, in practice, prisoners still exchange goods and services. U.S. prisoners used cigarettes as a medium of exchange until smoking was banned in U.S. prisons in 2003. After 2003, prisoners looked to other items on the commissary menu to facilitate exchange. In 2008, the Wall Street Journal reported that energy bars had caught on as money in some U.S. prisons. One important difference between using energy bars and using dollars as money is that____ have intrinsic value.
Energy bars are an example of ___ money.
How does money overcome the problem of barter system explain?
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Exploring Macroeconomics
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- Suppose a group of people decided to create their own economic system with cartons of milk serving as money. If we decided to use this “liquid asset” as our medium of exchange and all prices were measured in cartons of milk, milk would still not be a good form of money because it would not be a good: A) unit of account. B) medium of exchange. C) store of value. D) near-money.arrow_forwardWhich 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."arrow_forwardEconomists have documented Pacific island economies in which large rocks and boulders were used as money. While this may work for a group of people who only transact with others on the island, the rocks would not be a useful form of money in the world economy because: A. Large rocks are not easily standardized B. Large rocks are not easily divisible C. Large rocks are not easy to carry D. All of the above are truearrow_forward
- Despite the fact that personal possession of currency is not allowed by U.S. prisons, in reality, incarcerated people still exchange goods and services. Until 2003, the year in which the U.S. government banned smoking in federal penitentiaries, cigarettes were the preferred medium of exchange among prisoners. A main difference between using cigarettes and using dollars as money is that have intrinsic value. U.S. dollars are an example of money.arrow_forwardersonal possession of currency is prohibited in U.S. prisons, although, in practice, prisoners still exchange goods and services. U.S. prisoners used cigarettes as a medium of exchange until smoking was banned in U.S. prisons in 2003. After 2003, prisoners looked to other items on the commissary menu to facilitate exchange. In 2008, the Wall Street Journal reported that energy bars had caught on as money in some U.S. prisons. One important difference between using energy bars and using dollars as money is thatenergy bars have intrinsic value. Energy bars are an example ofcommodity money.arrow_forwardWhich of the below statements DOES NOT CORRECTLY capture the meaning of the word "money" as economists use the term, and as Charles Wheelan explains the term? Group of answer choices Whatever serves as money must be available in abundance, and must not be scarce. It serves as a medium of exchange, something that facilitates trade and transactions. It serves as a unit of account, so that the costs of all kinds of goods and services can be measured can be compared using one scale. Whatever serves as money must be portable and durable.arrow_forward
- Throughout history, all sorts of interesting things have been used as money, including fresh fish and cattle. Fresh fish is not an effective form of money. What essential characteristic of money does fresh fish lack that most makes it ineffective? medium of exchange allocated by the government unit of account store of value stackablity Cattle is not an effective form of money. What essential characteristic of money does cattle lack that most makes it ineffective? unit of account stackability store of value allocated by the government medium of exchangearrow_forwardKevin has saved $30 per week to buy a new Blu-Ray player. He compares two different models: a Panaview that is priced at $130 and a Zony model that is priced at $140. Kevin decides to purchase the Zony Blu-Ray player for $140. Identify what role money plays in each of the following parts of the story. Hint: Select each role only once. Role of Money Medium of Exchange Unit of Account Store of Value Kevin can easily determine that the Panaview model has a lower price than the Zony model. Kevin saved $30 per week. Kevin pays $140 for the Blu-Ray player.arrow_forwardIs barter becoming more or less prevalent in the US economy? What are some underground market activities that are considered legal? What are some underground market activities that are considered illegal?arrow_forward
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