MacroeconomicsTest3 - Macroeconomics Test#3 Chapter 16 The Monetary System Money The set of assets in an economy that people regularly use to buy goods

MacroeconomicsTest3 - Macroeconomics Test#3 Chapter 16 The...

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Macroeconomics Test #3 04/19/2015 ° ° ° Chapter 16 – The Monetary System ° Money : The set of assets in an economy that people regularly use to buy goods and services from other people. Characteristics Of Money : Medium of Exchange: Is an item that buyers give to sellers when they purchase goods and services. Ex. When you go to a store to buy a shirt, the store gives you the shirt and you give the store your money. This transfer of money from buyer to seller allows the transaction to take place. Unit of Account Is the yardstick people use to post prices and record debts. Ex. When we want to measure and record economic value, we use money as the unit of account. Store of Value Is an item that people can use to transfer purchasing power from the present to the future. When a seller accepts money today in exchange for a good or service, that seller can hold the money and become a buyer of another good or service at another time. Liquidity: the ease with which an asset can be converted into the economy’s medium of exchange. Because money is the economy’s medium of exchange, it is the most liquid asset available. Most stocks and bonds can be sold easily with small cost, so they are relatively liquid assets.
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