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Chapter 3: Q.1 (page 110)
Why is simply counting currency an inadequate measure of money?
Counting currency is inadequate measure because, it does not cover entire money supply of the economy.
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Over several hundred years, payments systems used in countries across the world have evolved. For each of the following situations identify the type of payment utilized and at least one reason why economies are moving from checks to electronic payments.
a. Sheila visits a local grocery store to purchase a dozen eggs and a bag of dog food. She uses a 鈧�100 note to pay for the goods.
b. Rachael Garcia, a manager at Proxall Pharmacy, used a piece of gold worth $20 to pay for office supplies she needed this month.
c. Edward has just moved to the city to be closer to his office. He was shopping online for some pieces of furniture and he bought a wardrobe and a table lamp. He used a checking account to initiate an automatic bill payment for the items.
The money supply is the entire amount of money in circulation, including cash, coins, and bank account balances. The money supply is typically defined as a collection of safe assets that consumers and companies can use to make payments or invest in short-term.
Why were people in the United States in the nineteenth century sometimes willing to be paid by check rather than with gold, even though they knew there was a possibility that the check might bounce?
In ancient Greece, why was gold a more likely candidate for use as money than wine?
Suppose that the cost of a movie ticket is \(12, and a latte costs \)6. Why would the theater management say the cost of admission is $12 and not two lattes? Explain why it is more efficient to compare the value of commodities in monetary terms.
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