Chapter 3: Q. 10 (page 111)
In ancient Greece, why was gold a more likely candidate for use as money than wine?
Gold is more store of value than wine
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Three goods are produced in an economy by three individuals: Good Producer Apples Orchard owner Bananas Banana grower Chocolate Chocolatier If the orchard owner likes only bananas, the banana grower likes only chocolate, and the chocolatier likes only apples, will any trade between these three persons take place in a barter economy? How will introducing money into the economy benefit these three producers?
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?
Go to http://www.federalreserve.gov/releases/h6/Current/.
a. What have been the growth rates of M1 and M2 over the past 12 months?
b. From what you know about the state of the economy, do these growth rates seem expansionary or restrictive?
Why have some economists described money during a hyperinflation as a “hot potato” that is quickly passed from one person to another?
Go to the St. Louis Federal Reserve FRED database, and find data on small-denomination time deposits (STDSL), savings deposits and money market deposit accounts (SAVINGSL), and retail money market funds (RMFSL). Calculate the percentage change of each of these three components of M2 (not included in 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. Use your answers from question 1 to determine which grew faster: the non-M1 components of M2, or the M1 money supply.
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