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Chapter 3: Q. 10 (page 111)

In ancient Greece, why was gold a more likely candidate for use as money than wine?

Short Answer

Expert verified

Gold is more store of value than wine

Step by step solution

01

Step 1. Introduction

Money aids in the facilitation of trade. Buyers and sellers agree on the value of money, making it a means of exchange. Money can lose its value during periods of hyperinflation, which occur when an economy is flooded with too much money.

02

Step 2. Explanation

Wine is both more difficult and perishable than gold. As a result, gold is a greater store of value than wine, with lower transaction costs. As a result, it is a better candidate for usage as currency.

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Most popular questions from this chapter

Assume that you are interested in earning some return on the idle balances you usually keep in your checking account and decide to buy some money market mutual funds shares by writing a check. Comment on the effect of your action (with everything else the same) on M1 and M2

Why have some economists described money during a hyperinflation as a 鈥渉ot potato鈥� that is quickly passed from one person to another?

19. The table below shows hypothetical values, in billions of dollars, of different forms of money.

a. Use the table to calculate the M1 and M2 money supplies for each year, as well as the growth rates of the M1 and M2 money supplies from the previous year.

b. Why are the growth rates of M1 and M2 so different? Explain.


2019202020212022
Currency880895900906
Money market mutual fund shares680685683692
Saving account deposits5,5005,7805,9686,105
Money market deposit accounts1,2141,2451,2741,329
Demand and checkable deposits1,000972980993
Small denomination time deposits8408711,1331,576
Traveler's check5543
3-month treasury bills1,9862,3742,4362,502

Go to the St. Louis Federal Reserve FRED database, and find data on currency (CURRSL), traveler鈥檚 checks (TVCKSSL), demand deposits (DEMDEPSL), and other checkable deposits (OCDSL). Calculate the M1 money supply, and calculate the percentage change in M1 and in each of the four components of M1 from the most recent month of data available to the same time one year prior. Which component has the highest growth rate? The lowest growth rate? Repeat the calculations using the data from January 2000 to the most recent month of data available, and compare your results.

If you use an online payment system such as PayPal to purchase goods or services on the Internet, does this affect the M1 money supply, the M2 money supply, both, or neither? Explain
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