and reduce our searchcost. Money allows us to reduce the number of stated
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prices we need.
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3. You read a news story about a country that is suffering from rapid, ongoing
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increases in the cost ofliving. Which characteristic of money is being directly
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negatively impacted in that economy?
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a. Unit of account ll ll
b. Medium of exchange ll ll
c. Store of value ll ll
d. Double
ll coincidence of ll
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2-2 Section Review ll
1. Bobby is confused. He states: “Since prisoners are not allowed to smoke in prisons
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any longer, Radford’s examples of cigarettes in POW camps no longer
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applies.” How would you explain to Bobby how Radford’s story
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demonstrates the concepts of the criteria of money, as well as the importance
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, ofchanges in the money supply?
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ANS: Any asset that is able to be standardized, divisible, durable and in demand
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could be currency, as long as it is a medium of exchange, is a unit of
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account and has store of value. Cigarettes were money.
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