Economic functions of money, Macroeconomics

Money is generally considered to have three economic functions:

  • A medium of exchange. This is its most significant role. Without money we would live in a barter economy where we would have to trade services and goods for other services and goods. If I had fish but wanted bread, I would need to find someone who was in precise opposite situation. In a monetary economy I can trade fish for money with one individual and money for bread with another. Money solves what is known as the double coincidence of wants.
  • A unit of account. In a monetary economy, all prices can be expressed in monetary units that everyone may relate to. Without money, prices should be expressed in units of other goods and comparing prices are more difficult. You can find that a grilled chicken costs 2 kilos of cod in one place and 4 kilos of strawberries in another. Finding the cheapest grilled chicken isn't easy.
  • Store of value. If you are a fisherman and have a temporary surplus of fish that you want to store for future, storing the fish may not be a great idea. Money, conversely, stores well. Other commodities, like gold, have this feature as well.
Posted Date: 8/13/2013 2:55:50 AM | Location : United States







Related Discussions:- Economic functions of money, Assignment Help, Ask Question on Economic functions of money, Get Answer, Expert's Help, Economic functions of money Discussions

Write discussion on Economic functions of money
Your posts are moderated
Related Questions
What are the main aspects of globalisation Two of the other main aspects of globalisation are greater international mobility of capital and to some extent of labour. Globalisa

you and your neighbor (n) consume without trading. suppose you are initially consuming 7 bananas and 3 coconuts and your neighbor is initially consuming 6 bananas and8 coconuts. Yo

If income falls below its potential and the income tax rate is reduced, this will: A. raise the passive deficit but reduce the structural deficit. B. raise both the passive and str

Use a diagram of the open economy model (e.g. fig 32.4 from the text) to illustrate and explain the effect of the following event on the market for loanable funds, the level of net

Many developing countries have suffered banking crises in which depositors lost part or all of their deposits (in some countries there is no deposit insurance). This type of crisis

What are the pros and cons of reducing dependence on outsourcing in order to fulfill social obligations toward stakeholders?

how long will it take for you to help me with assignment

COMPARE AND CONTRAST KEYNESIAN THEORY AND CLASSICAL MODEL

why is imports subtracted from the expenditure approach

Why is quantitative easing used during liquidity trap when it lowers interest rates too?