Money and Banking problem set

Econ 3003

Money and BankingMoney and Banking

Spring 2016

PROBLEM SET 0

Dr. Fusaro

Professionalism means it is easy to read. Therefore, in order to be professional, your problem set should be typed.

1. Would you be willing to give up your checkbook and instead use an electronic means of payment if it were made available? Why or why not?

2. Rank the following assets from most liquid to least liquid: (a) An Office Building (b) Money Market Deposits (c) An Industrial Printing Press (d) A 20-year Treasury Bond (e) Certificates of Deposit

3. Compare two economies: a barter economy versus an economy that uses money. In order to exchange goods and services in the barter economy will a double coincidence of wants be necessary? Is a double coincidence of wants necessary in the money economy?

4. State whether each of the following statements is true or false and explain your answer. a) A good will serve as money if, and only if, the government mandates that the good be

accepted in payment of debts. b) A good will serve as money only if it has intrinsic value or if it is backed by precious

metals. c) A good will serve as money only if citizens accept the good as a means of payment for

transactions and debts. d) A good will serve as money if, and only if, it is standardized, divisible, portable, and

durable.

5. If the money supply doubled, but nominal purchases remained constant, what would happen to velocity of money? Explain your answer.