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Chapter 15: Q. b-For Critical Thinking (page 327)

Why do you suppose that people first stopped regularly asking Zimbabwean dollars as a store of value before deciding to halt their use as a medium of exchange?

Short Answer

Expert verified

Local shops showed less pricing in Zimbabwe dollars since they needed foreign currency to import foreign goods, therefore citizens began to use foreign currency in their regular transactions.

Step by step solution

01

Zimbabwean dollars.

Local shops listed less prices in Zimbabwe dollars because they needed foreign currency to import foreign items, hence citizens were increasingly using foreign currency in daily trades.

Despite the lack of a license, many companies and street vendors continued to do so.

02

Reason for Zimbabwean revalue their money.

Following the hyperinflation, the ZWDwas demonetized and replaced with a basket of regional currencies. The multiple currency system was decommissioned in 2019and replaced with a new currency, the RTGSdollar. The multiple currency system was reestablished in 2020.

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Most popular questions from this chapter

Identify whether each of the following items is counted in M1 only, M2 only, both M1 and M2, or neither.

a. A \(1,000balance in a transactions deposit at a mutual savings bank

b. A \)100,000time deposit in a New York bank

c. A \(10,000time deposit an elderly widow holds at her credit union

d. A\)50 traveler's check not issued by a bank

e. A $50,000savings deposit

Draw an empty bank balance sheet, with the heading "Assets" on the left and the heading "Liabilities" on the right. Then place the following items on the proper side of the balance sheet:

a. Loans to a private company

b. Borrowings from a Federal Reserve district bank

c. Deposits with a Federal Reserve district bank

d. U.S. Treasury bills

e. Vault cash

f. Transactions deposits

Until 1946, residents of the island of Yap used large doughnut-shaped stones as financial assets. Although prices of goods and services were not quoted in terms of the stones, the stones were often used in exchange for particularly large purchases, such as livestock. To make the transaction, several individuals would insert a large stick through a stone's center and carry it to its new owner. A stone was difficult for any one person to steal, so an owner typically would lean it against the side of his or her home as a sign to others of accumulated purchasing power that would hold value for later use in exchange. Loans would often be repaid using the stones. Which of the functions of money did the stones perform?

Identify whether each of the following amounts is counted in M1 only, M2 only, both M1and M2, or neither.

a. \(50billion in U.S. Treasury bills

b. \)15billion in small-denomination time deposits

c. \(5billion in traveler's checks not issued by a bank

d. \)20billion in money market deposit accounts

Even though the federal government requires depository institutions to contribute premiums to the FDIC, who ultimately has to provide sufficient funds if the FDICruns out of cash? (Hint: The FDICborrowed funds from the U.S. Treasury in 1991and 2009.)
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