The Story of Money — Module Assessment

Question 1

Which of the following best describes the three classic functions of money?

Accepted Answer

Medium of exchange, unit of account, and store of value

Answer

Gold backing, government mandate, and inflation control

Answer

Coins, banknotes, and digital balances

Answer

Saving, borrowing, and investing

Question 2

According to the credit-first view associated with David Graeber, what likely preceded coined money in some early societies?

Accepted Answer

Systems of credit and recorded debts, such as clay-tablet tallies in Mesopotamia

Answer

Widespread use of gold coins

Answer

Pure spot barter with no records

Answer

Central banks issuing paper currency

Question 3

What was the main advantage of a bill of exchange for a long-distance merchant?

Accepted Answer

It let value be paid in a distant city without physically shipping coins

Answer

It guaranteed a fixed return on savings

Answer

It eliminated all risk of a debtor defaulting

Answer

It was issued only by central banks

Question 4

Which statement about Luca Pacioli and double-entry bookkeeping is accurate?

Accepted Answer

He described and popularised the method in a 1494 treatise, though merchants had used it earlier

Answer

He invented double-entry bookkeeping from scratch in 1494

Answer

He banned the practice in Renaissance Italy

Answer

He had no connection to accounting history

Question 5

Which sequence best captures the recurring pattern of a speculative bubble described in this lesson?

Accepted Answer

A story, easy credit, euphoria, a scramble for the exits

Answer

Regulation, stability, growth, reform

Answer

Recession, recovery, boom, plateau

Answer

Saving, investing, diversifying, rebalancing

Question 6

How should the popular account of Dutch tulip mania be treated?

Accepted Answer

As a widely cited episode whose severity is debated by modern historians

Answer

As a fully settled fact with no scholarly disagreement

Answer

As pure fiction with no historical basis

Answer

As recent event from the twentieth century

Question 7

According to this lesson, what turns an ordinary crash into a full financial crisis?

Accepted Answer

Systemic damage as leverage forces selling, contagion spreads, and confidence collapses

Answer

A single day of falling prices with no other effects

Answer

Government reports published after the fact

Answer

A rise in the price of a single collectible asset

Question 8

Which was a defining event of the 2007-2008 global financial crisis?

Accepted Answer

The collapse of Lehman Brothers in September 2008

Answer

The collapse of Dutch tulip prices

Answer

The launch of the South Sea Company

Answer

The Wall Street Crash of 1929

Question 9

In Adam Smith's 'The Wealth of Nations' (1776), the 'invisible hand' broadly refers to the idea that:

Accepted Answer

Individuals pursuing their own gain through trade can produce outcomes that also benefit society, without intending to.

Answer

A central authority must plan the economy in detail for it to function.

Answer

Money has value only because governments enforce it by law.

Answer

Recessions are best cured by large government spending programmes.

Question 10

What did John Maynard Keynes argue in 'The General Theory of Employment, Interest and Money' (1936)?

Accepted Answer

That economies can get stuck with high unemployment when total demand is too low, and governments can sometimes help by raising demand.

Answer

That markets always return to full employment quickly on their own.

Answer

That the division of labour is the single source of national wealth.

Answer

That currencies should always be backed by gold.

Question 11

Why is fiat money able to hold its value even though it cannot be exchanged for gold or another commodity?

Accepted Answer

Because people accept it and trust the institutions, such as central banks and governments, that stand behind it.

Answer

Because every note is secretly backed by an equal weight of silver.

Answer

Because it has no value at all and is only used out of habit.

Answer

Because its value is fixed forever by international treaty.

Question 12

What happened in the 'Nixon shock' of 1971?

Accepted Answer

The United States suspended the US dollar's convertibility into gold, helping usher in the modern era of fiat currencies.

Answer

The United States adopted the gold standard for the first time.

Answer

The Bretton Woods system was first established.

Answer

All world currencies were permanently fixed to the price of gold.

Question 13

According to the history covered in this lesson, what fundamentally makes something function as money?

Accepted Answer

Shared trust that others will accept and honor it

Answer

The precious metal or physical material it is made from

Answer

A guarantee that its value can never fall

Answer

A government law forbidding any other form of payment

Question 14

What is the core, widely cited pattern documented in Reinhart and Rogoff's "This Time Is Different" (2009)?

Accepted Answer

Before many crises, people convince themselves the old cautionary lessons no longer apply

Answer

Financial crises have become impossible in modern economies

Answer

Every rising market is certain to become a bubble and crash

Answer

Credit and debt are always harmful to a nation's growth