Question

Please answer all questions, thanks.

1. The advantage of money as a store of value is that:

	A.	It is the only asset that never loses its value.
	B.	Its value does not diminish as inflation accelerates.
	C.	Its value is guaranteed by the government.
	D.	It provides investors with a high return.
	E.	It provides the convenience of being already in the form that it can be used as a medium of exchange.

2. When money allows us to make transactions:

	A.	It is usually a form of commodity money.
	B.	It is usually paper money.
	C.	It serves as a medium of exchange to facilitate exchange.
	D.	It serves as a unit of account to denominate prices and contracts.
	E.	It serves as a convenient store of value to transport purchasing power over time and space.

3. What can destroy a monetary system?

	A.	Too much government regulation.
	B.	A prolonged period of high unemployment.
	C.	Large government budget deficits.
	D.	Significant defaults by households and businesses.
	E.	A raging inflation.

4. A unit of account is:

	A.	A function of money where money serves to denominate prices and contracts.
	B.	A function of money where money serves to facilitate exchange.
	C.	A function of money where money has commodity value.
	D.	A function of money where money serves as a convenient store of value.
	E.	A function of money where money allows traders to make purchases in the future.

Answer 1

a) "C"

The value of money is guaranteed by the government. (it does lose its value in time of inflation and there is no guarantee that the value will increase after investment and the last option given defines money value as a medium of exchange. )

b) "C"

IT acts as a medium of exchange to facilitate exchange. (there can be electronic money as well and it doesn't serve as a unit of account here in the transaction.)

c) "E" raging inflation. (example Zimbabwe and currently Venezuela)

d) "A" where money serves as a denominator of the price.