Question

1) True or False: Shift in the supply of bonds changes the interest rate but the converse is not true.

2)True or False: A barter economy is more efficient than a money-based economy because goods and services are directly traded.

3) Any object used as money in an economy is generally:

A) The same as income and wealth B) All of the answers C)Difficult to transport D) Accepted as a means of payment for goods and services E) Found in a barter economy F) Perishable in a short period

Answer 1

Part a

False

Price of bonds and interest rate on bonds are negatively related . Increase in price of bonds will decrease the interest rate on bonds. Price of bonds and and supply of bonds is positively related. Increase in interest rate decreases the price bonds which further decreases the supply of bonds. Hence, change in intherest rate affects the supply of bonds.

Part b

False

Barter economy is not a an efficient economy. Barter economy has many problems in it. Lack of double coincidence of wants, difficulty in storing value, lack of common measure of value, difficulty in deferred payments, lack of specialization are some of the major problems. Money can overcome from all of these difficulties. Hence it is more efficient system.