Question

1.) Anything that functions as a medium of exchange is automatically considered money by economists.

True

False

2.) A currency board issues money for a country backed by:

a.) money of another country

b.) gold

c.) bonds

d.) gold, silver, and copper

3.) M1 includes primarily

a.) currency and checking accounts

b.) only checkable deposits

c.) currency, checking and small savings accounts

d.) currency and coins only

Answer 1

During earlier days, commodity exchange was used to purchase one in exchange for another. In the current situation, money is used as a medium to exchange goods and money has value and equal exchange is made for the commodity with the money. Economists consider the medium of exchange as another commodity or money.

Answer: False

In the currency board, domestic currencies are backed by any of the foreign currency. The currency board shows the exchange rate of each currency and one can exchange one country's currency for another country's currency.

Answer: A. Money of another country

M1 includes the liquid currencies. Currency is the liquid cash and is categorized into M1. Checking accounts allows withdrawal and deposits and this is considered as liquid currency. So, both currency and checking currencies are categorized into M1.

Answer: A. Currency and checking accounts