Which term below fits closest to money functioning as a unit of accounting?
A) medium of exchange
B) adverse selection
C) standard of value
D) liquidity
C
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
If the interest rate rose above the equilibrium rate, people would attempt to __________ bonds. Bond prices would __________ and the interest rate would __________
A) sell; rise; fall B) buy; rise; fall C) sell; fall; rise D) buy; rise; rise
When an asset is described as being highly liquid, which one of the following characteristics does it possess?
A) It earns a high rate of interest, so its purchasing power is maintained when prices rise. B) It is easily and readily converted into money without any loss in purchasing power. C) The face value of the asset is somewhat less than its value when converted into currency. D) The asset holds its value over time.
Dan bought $10,000 of stocks in Orange, a fruit company. Gump invested $10,000 in a mutual fund that included Orange in its portfolio, while Bubba bought Orange's bonds worth $10,000 . If Orange makes a huge profit, which of the following would be true? a. Both Dan and Gump will make profits on their respective investments, while Bubba will suffer a loss. b. Gump will earn more profits on his
investment than either Dan or Bubba. c. Dan will earn more profits on his investment than either Gump or Bubba. d. All three will earn the same amount of profit since they each have invested the same amount.