79 #
© 2014 Pearson Canada Inc.#
Explain the evolution of the payments system. Is the system headed towards a cashless
society?
Answer: Societies begin with a barter system and then introduce commodity money which was
replaced with paper money. Fiat money, is legal tender, based on the backing of an authority --
typically the government. Cheques and electronic payments were the next evolution in the
system. A cashless society is unlikely due to several concerns: 1) it is expensive to set up and 2)
it raises privacy and security concerns.
Diff: 1 Type: SA Page Ref: 50 - 52
Skill: Recall
Objective List: 3.3 Show understanding of payments system and illustrate how information
technology has paved the way for e-money, e-banking, and e-commerce
What are electronic payments? how do they reduce transaction costs? by how much?
Answer: In the past when paying bills you had to mail a cheque but now banks provide a
website in which you log on, make a few clicks and make the payment that is transmitted
electronically. You can even avoid logging in as reoccurring bills can be automatically deducted
from your bank account. Electronic payments reduce transaction costs as you do not have to pay
a stamp to send a cheque and also you save time paying your bills electronically. Estimated cost
savings when a bill is paid electronically rather than a cheques exceed one dollar.
Diff: 2 Type: SA Page Ref: 49
Skill: Recall
Objective List: 3.3 Show understanding of payments system and illustrate how information
technology has paved the way for e-money, e-banking, and e-commerce
3.4 Measuring Money
If an individual moves money from a demand deposit account to a money market mutual fund,
____.
A) M1+ decreases and M2 stays the same
B) M1+ stays the same and M2+ increases
C) M1+ stays the same and M2 stays the same
D) M1+ increases and M2 decreases
Answer: B
Diff: 3 Type: MC Page Ref: 51
Skill: Applied
Objective List: 3.4 Explain money measurement matters
If an individual moves money from a chequing account to a money market mutual fund,
____.
A) M1+ decreases and M2+ increases
B) M1+ stays the same and M2+ increases
C) M1+ stays the same and M2+ stays the same
D) M1+ increases and M2+ decreases
Answer: A
Diff: 3 Type: MC Page Ref: 51
Skill: Applied
Objective List: 3.4 Explain money measurement matters