1.In many casinos, a person buys chips to use for gambling. Within the casino's walls, customers often can use these chips to buy food and drink or even a hotel room. Do chips in a gambling casino serve all three functions of money?

2.Can you name some item that is a store of value, but does not serve the other functions of money?

3.If you are out shopping for clothes and books, what is easiest and most convenient for you to spend: M1 or M2? Explain your answer.

4.For the following list of items, indicate if they are in M1, M2, or neither:

1. Your $5,000 line of credit on your Bank of America card
2. $50 dollars' worth of traveler's checks you have not used yet
3. $1 in quarters in your pocket
4. $1200 in your checking account
5. $2000 you have in a money market account

7.What are the four functions that money serves?

8.How does the existence of money simplify the process of buying and selling?

9.What is the double-coincidence of wants?

10.What components of money do we count as part of M1?

11.What components of money do we count in M2?

12.Why do we call a bank a financial intermediary?

13.What does a balance sheet show?

14.What are a bank's assets? What are its liabilities?

15.How do you calculate a bank's net worth?

16.How can a bank end up with negative net worth?

17.What is the asset-liability time mismatch that all banks face?

18.What is the risk if a bank does not diversify its loans?

19.How do banks create money?

20.What is the formula for the money multiplier?r