Question
Question 1: You studied that money serves as society in 3 functions : A unit of account, a medium of exchange, and a store of
Question 1: You studied that money serves as society in 3 functions: A unit of account, a medium of exchange, and a store of value. Different situations are described below. What function (one of the 3 functions) does each of the case/situation serve? Give a short explanation for each.
a)Credit cards are widely accepted as a method of payment for both goods and services.
b)Tom paid $150,000 for his house in 2010 and sold it for $300,000 in 2019. What function did the house serve during the time Tom owned it?
c)Sarah used $10,000 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment?
d)If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?
Question 2: For the following list of items, indicate if they are in M1, M2, or neither:
a)Your $5,000 line of credit on your Bank of America card
b)$50 dollars' worth of traveler's checks you have not used yet
c)$1 in quarters in your pocket
d)$1200 in your checking account
e)$2000 you have in a money market account
Question 3:How do the expansionary and contractionary monetary policies affect the quantity of money? How do these policies affect the cost of borrowing and lending for banks? Please give a short answer.
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