CFA Practice Question

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CFA Practice Question

In order to function as a medium of exchange, money must ______

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 -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
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