On the island of Yap, 5 canoes have a value of one stone wheel known as a fei. What function of money do fei serve in this example?
A. store of value
B. medium of exchange
C. medium of deferred payment
D. unit of account
Answer: D
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Under a system of flexible exchange rates, in the long run, a nation's balance on current account and capital account transactions will
a. increase continuously. b. decrease continuously. c. tend to net out to zero, indicating a balance between the debits and credits. d. tend to increase if the nation is running a balance of trade surplus and decrease if it is running a balance of trade deficit.
If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $12,000 to purchase those identical goods in 2015, then the price index for 2015 is
A. (12000/10000)*100=120. B. 100. C. (10000/12000)*100=83.33. D. unknown given this data.
In the special case of the 100 percent-reserve banking, the money multiplier is
a. 1 and banks create money. b. 1 and banks do not create money. c. 2 and banks create money d. 2 and banks do not create money.
If a gamble has an expected value of zero, then it is termed a(n):
A. unfair gamble. B. fair gamble. C. better-than-fair gamble. D. zero gamble.