1) There is much debate about whether the U.S. government should eliminate the penny from circulation and instead round all prices to the nearest 5 cents for everyday cash transactions. Which function of money does a penny not serve well?

a) Medium of exchange

b) Unit of account

c) Store of value

d) The penny does not serve any of the functions of money well.

2) Which of the following forms of money would best represent fiat money?

a) Silver quarters made prior to 1965.

b) An hour-long golf lesson given in exchange for an hour of tutoring in economics.

c) A $20 bill printed in 2015.

d) A rare baseball card given to a landlord in place of rent.

3) The country of Eggville uses eggs as its official form of currency. All prices in Eggville are shown in terms of eggs, and residents carry around baskets of eggs to buy goods and services. Residents, however, cannot save eggs because they end up spoiling. Which functions of money do eggs serve?

a) Medium of exchange and store of value.

b) Unit of account and store of value.

c) Medium of exchange and unit of account.

d) Medium of exchange, unit of account, and store of value.

4) Gus takes his $15 in lemonade stand earnings and deposits it into his savings account. Meanwhile, Gus's dad borrows $20,000 to buy a new family car. Gus's $15 represents a(n) ____ for the bank, while his dad's $20,000 loan represents a(n) ____ for the bank.

a) asset; asset

b) liability; liability

c) asset; liability

d) liability; asset

5) If the reserve requirement is currently 20%, what is the maximum amount of money that could be generated from a $2,000 bank deposit?

a) $1,600

b) $2,000

c) $4,000

d) $10,000

6) Which of the following factors will result in the greatest amount of money being created?

a) A $1,000 cash deposit into a checking account.

b) A $1,000 transfer from a checking account to a savings account.

c) $1,000 in coins that is converted into $1,000 in bills.

d) A $1,000 bond that matures which is used to buy another $1,000 bond.