Chapter 13: Problem 7

Which statement is true? ( \(\mathrm{LO} 2)\) a) Checks are not money. b) A small part of our money supply is silver ccrtificates. c) Most of our money supply is in the form of currency. d) None of these statements is true.

Short Answer

Expert verified

The correct answer is a) Checks are not money, as checks are instruments for transferring money rather than being considered money themselves.

Step by step solution

Evaluate statement (a)

We need to determine if checks are considered money or not. Checks are written orders from a depositor that instructs a bank to pay a specified sum of money to a recipient from the depositor's account. While they can be used for transactions, they are not considered as money themselves but rather as an instrument for transferring money. Thus, statement (a) is true: Checks are not money.

Evaluate statement (b)

Silver certificates were paper currency issued by the US government from 1878 to 1964. They could be exchanged for an equivalent face value of silver coins. However, since 1964, silver certificates have not been redeemable in silver and are no longer part of the contemporary money supply. Thus, statement (b) is false: A small part of our money supply is not silver certificates.

Evaluate statement (c)

Our money supply consists of various forms of financial assets, including currency (bills and coins), demand deposits, savings deposits, and other liquid assets. Although currency is a significant part of the money supply, most of our money is in the form of electronic deposits and balances in various accounts. Thus, statement (c) is false: Most of our money supply is not in the form of currency.

Evaluate statement (d)

Statement (d) claims that none of the statements (a, b, c) is true. However, we have already established that statement (a) is true. Therefore, statement (d) is false. In conclusion, the correct answer to this exercise is: a) Checks are not money.

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