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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

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?

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?

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 €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.

In prison, cigarettes are sometimes used among inmates as a form of payment. How is it possible for cigarettes to solve the “double coincidence of wants” problem, even if a prisoner does not smoke?

For each of the following assets, indicate which of the monetary aggregates (M1 and M2) includes them:

a. Currency b. Money market mutual funds c. Small-denomination time deposits d. Checkable deposits
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