Question

Determine whether each of the following would fulfill the three functions of money. If the item does not fulfill all three, name at least one function of money that it violates.

Instructions: You may select more than one answer. Click the box with a check mark for correct answers, and click to empty the box for the wrong answers.

a. Salt

	Salt could be a good store of value because salt keeps for a long time.
	Salt fulfills the medium of exchange function if people are willing to accept it in exchange for goods and services.
	Salt could be a good unit of account as long as people can agree on the prices in terms of salt.
	Salt could be a medium of exchange because it is useful.
	Salt could be a unit of account because it can be easily measured.

b. The barter system

	Under barter, goods and services will keep their worth, making them a good store of value.
	Barter is a good medium of exchange because everyone will accept what we offer.
	If people agree on the ratios via which one good or service would trade for another, the unit of account function could be satisfactorily fulfilled.
	Goods and services traded directly under the barter system may not keep their worth, making them a poor store of value.
	Barter is a poor medium of exchange because not everyone will accept what we offer.

c. Hockey cards   

	Hockey cards can keep fairly well over time, so they could act as a good store of value.
	Hockey cards could fulfill the medium of exchange function if everyone agreed to accept them for goods and services.
	Hockey cards have rapidly changing prices, making them a poor tool as a unit of account.
	Hockey cards have steady prices, making them a good tool as a unit of account.
	Hockey cards are made of cardboard, so they are a poor store of value.

d. Canadian Tire money

	Canadian Tire money could fulfill the medium of exchange function but only at Canadian Tire stores
	Like currency, Canadian Tire money is subject to rapid changes in price level as they can be spend in the future, so they could not act as a good store of value.
	Since they are denominated in the same format as currency, so it could fulfill as the unit of account function.
	Canadian Tire money couldn't fulfill the medium of exchange function but only at Canadian Tire stores.
	Like currency, Canadian Tire money is not subject to rapid changes in price level as they can be spend in the future, so they could not act as a good store of value.

Answer 1

a. Salt

• Salt could be a good store of value because salt keeps for a long time: TRUE
• Salt fulfills the medium of exchange function if people are willing to accept it in exchange for goods and services: TRUE
• Salt could be a good unit of account as long as people can agree on the prices in terms of salt: TRUE
• Salt could be a medium of exchange because it is useful: FALSE (The medium of exchange property is not satisfied here because the individuals might not accept what the other is offering)
• Salt could be a unit of account because it can be easily measured: TRUE

b. The barter system

• Under barter, goods and services will keep their worth, making them a good store of value: FALSE (not necessarily true)
• Barter is a good medium of exchange because everyone will accept what we offer: FALSE (not necessarily true)
• If people agree on the ratios via which one good or service would trade for another, the unit of account function could be satisfactorily fulfilled: TRUE
• Goods and services traded directly under the barter system may not keep their worth, making them a poor store of value: TRUE
• Barter is a poor medium of exchange because not everyone will accept what we offer: TRUE

c. Hockey cards  

• Hockey cards can keep fairly well over time, so they could act as a good store of value: TRUE
• Hockey cards could fulfill the medium of exchange function if everyone agreed to accept them for goods and services: TRUE
• Hockey cards have rapidly changing prices, making them a poor tool as a unit of account: TRUE
• Hockey cards have steady prices, making them a good tool as a unit of account: FALSE (They have changing prices)
• Hockey cards are made of cardboard, so they are a poor store of value: TRUE

d. Canadian Tire money

• Canadian Tire money could fulfill the medium of exchange function but only at Canadian Tire stores: TRUE
• Like currency, Canadian Tire money is subject to rapid changes in price level as they can be spend in the future, so they could not act as a good store of value: FALSE (They can act as store of value)
• Since they are denominated in the same format as currency, so it could fulfill as the unit of account function: TRUE
• Canadian Tire money couldn't fulfill the medium of exchange function but only at Canadian Tire stores: TRUE
• Like currency, Canadian Tire money is not subject to rapid changes in price level as they can be spend in the future, so they could not act as a good store of value: TRUE