Econ 102 Chapter 13 Study Guide

Econ 102 Chapter 13 Study Guide - Econ Chapter 13 Study...

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Econ Chapter 13 Study Guide 23:03 Money:  The economic definition is any asset that people are generally willing to  accept in exchange for goods and services or for payment of debts.  Asset:  Anything of value owned by a person or a firm.  Double coincidence of wants:  a situation that must occur in order for a barter  exchange to take place. Both sides must want what the other is offering.  Commodity Money:  a good used as money that also has value independent of  its use as money. Deerskins The functions of Money: Must fulfill the following four functions: Medium of exchange o Serves as medium of exchange when sellers are willing to accept it in  exchange for goods or services When the local supermarket accepts your $5 bill in exchange for bread  and milk, the $5 bill serves as a medium of exchange.  Unit of account o Each good has a single price quoted in terms of the medium of exchange  A way of measuring value in the economy in terms of money dollar is unit of exchange in America Store of value o Money allows value to be stored easily If you don’t use all of your accumulated money, you can store for use in  the future (banks) o Money is not the only store of value Shares of google stock Treasury bond
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Real estate Financial assets offer an important benefit relative to holding money  because they generally pay a higher rate of interest or offer the  prospect of gains in value. Standard of deferred payment.  Money is useful because it can serve a standard of deferred  payment in borrowing and lending.  A furniture maker may be willing to sell you a chair today in  exchange for money in the future.  What can serve as money? o Five criteria make a good suitable to use as a medium of exchange The good must be acceptable to most people It should be of standardized quality so that any two units are identical It should be durable so that value is not lost by spoilage It should be valuable relative to its weight so that amounts large  enough to be useful in trade can easily be transported
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