- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 4. Monetary Policy
- Subject 1. Role of Central Banks
CFA Practice Question
In order to function as a medium of exchange, money must ______
B. maintain a constant value over an extended period of time.
C. be generally accepted in exchange for goods and services.
A. be backed by gold or some precious commodity.
B. maintain a constant value over an extended period of time.
C. be generally accepted in exchange for goods and services.
Correct Answer: C
To serve as medium of exchange, money must be accepted as such. It does not have to maintain a constant value, but if its value fluctuated wildly, people would stop accepting it as a medium of exchange.
User Contributed Comments 6
| User | Comment |
|---|---|
| SaeedAlam | If not backed by gold then it's value will fluctuate. |
| EMerkert | The dollar should be backed by gold or a precious commodity, but it is not, thanks Nixon. |
| leftcoast | And thanks EMerkert for an opinion that doesn't help anyone here. |
| jonan203 | opinion? or two thousand years of monetary history? all fiat currencies eventually return to their intrinsic value...zero -voltaire gold is money, and nothing else -jpmorgan |
| Inaganti6 | they won't ask us about our opinions on the test .... |
| Cartagena | +1 for keeping opinions out, but I agree |