Asked by margaux haguenauer on Jun 04, 2024
Verified
Which statement is true?
A) Our money supply is fixed by law and can be raised by only a very small percentage each year.
B) Our money supply is backed by gold.
C) Credit cards are a form of money.
D) Money makes an excellent store of value during times of inflation.
E) One of the basic jobs of money is a standard of value.
Money Supply
The entire sum of available monetary assets in an economy, comprising cash, coins, and the amounts held in checking and savings accounts, at a specific point.
Standard of Value
A recognized measure that is used to set the value of financial transactions, assets, or liabilities, enabling comparability across different entities or time periods.
Backed by Gold
Historically, refers to currencies that were directly convertible into a specified amount of gold, under the gold standard.
- Understand the foundational concepts of currency, encompassing its roles, the need for it, and the operation of the fractional reserve banking framework.
- Understand the importance of currency in enabling exchanges and surmounting the restrictions of direct trade.
Verified Answer
NH
Niamh HughesJun 10, 2024
Final Answer :
E
Explanation :
One of the basic functions of money is to provide a standard of value, meaning it can be used to compare the value of different goods and services.
Option A is incorrect as the money supply is not fixed by law and can be changed through various monetary instruments such as open market operations and reserve requirements.
Option B is incorrect as most modern economies are not on a gold standard and the value of money is not backed solely by gold.
Option C is incorrect as credit cards are not a form of money but rather a means of accessing credit or pre-existing funds.
Option D is incorrect as during times of inflation, the value of money decreases and it does not make a good store of value.
Option A is incorrect as the money supply is not fixed by law and can be changed through various monetary instruments such as open market operations and reserve requirements.
Option B is incorrect as most modern economies are not on a gold standard and the value of money is not backed solely by gold.
Option C is incorrect as credit cards are not a form of money but rather a means of accessing credit or pre-existing funds.
Option D is incorrect as during times of inflation, the value of money decreases and it does not make a good store of value.
Learning Objectives
- Understand the foundational concepts of currency, encompassing its roles, the need for it, and the operation of the fractional reserve banking framework.
- Understand the importance of currency in enabling exchanges and surmounting the restrictions of direct trade.