Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

What are the four main functions of money? Describe each role and give an example of how money works for each. The four main functions

image text in transcribed
What are the four main functions of money? Describe each role and give an example of how money works for each. The four main functions of money is as follows: 1. Medium of Exchange is defined as a function which gives people who provide goods or services a means of receiving something holding a monetary value. The manner in which you use the medium of exchange can give individuals a means to be a specialist in the field of service or subject matter expert producing specified goods. For example, using candy in a game of cards as a medium of exchange. Each of the pieces of candy could be representative of a certain value increasing or decreasing a wage value. 2. Unit of Account is serving as an item in which prices are designated. To designate something with a unit of account you are setting a cost which allows one to measure how much something is valued at. A unit of account makes sense to be used in terms of dollars because if used in terms of something else like berries it wouldn't be as easy to maintain the representation. To set anything in the unit of account as berries would not hold as strong for those who know, have, or what berries are. Keeping denoted prices in dollars keeps values ideal. 3. Store of Value for money is the function served for people who do not invest it or spend it right away. While keeping this money stored may not increase in value overtime but it surely saves in other areas that cost associated with housing or storing money in a financial institution. The transaction cost that come along with having money stored in a bank could come with some hefty fees. For example, a good practice is having a little bit of cash on your person in case of an emergency. If store a $50 in your wallet and never use it, when an emergency arises that requires cash you can handle it without an issue. 4. Standard of deferred payment is the function money serves when used to buy something and you don't have it but you later pay for. A great example of this is what some stores have like Lay- A-Way or payments towards credit

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Routledge To Global Political Economy Conversations And Inquiries

Authors: Ernesto Vivares

1st Edition

1351064525, 9781351064521

More Books

Students also viewed these Economics questions