Homework 2 - Emilie Gein Recitation 002 Homework 2 1 A A...

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Emilie Gein Recitation # 002 Homework 2 1. A) A barter economy is a method of trade that takes place as a direct exchange of goods. Very different than a monetary economy. b. Barter economies are insufficient for large economies because of the problem of coincidence of wants. It is hard to find someone who wants exactly what you have and has what you want. Too many participants and too many goods. c. The three roles of money are a medium of exchange (facilitates trade because readily acceptable by market participants) store of value (holds purchasing power over time) and as a unit of account (common measure of value that avoids problem of coincidence of wants) d. Credit cards are not counted in the money supply because the money supply is the value of financial assets and credit cards are not assets. Credit cards access funds you can borrow- a liability, not an asset. e. A disadvantage of commodity money is that its supply is based on the availability of the intrinsic object. Gold and silvers value fluctuates often, and
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