Chapter14Summary

Chapter14Summary - Chapter 14 Summary Tucker,...

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Chapter 14 Summary Tucker , Macroeconomics for Today , 5th Edn. 1. Barter exchange occurs when goods and services are directly exchanged for each other, without the use of money. Barter is inefficient, and it limits the extent of specialization and exchange in the economy. In a barter world, an economics professor who wants his/her car repaired must not only find a good repair person, but also one who is willing to be paid by taking economics lessons. In a money- using economy, the economics professor sells his/her economics lessons at the highest price possible, and takes the money and hires the best mechanic possible. Money, therefore, makes it easier for individuals to specialize and use their time in talents pursuing the things they do best, and using the money earned to hire those who have talents in other areas. In the absence of money, exchange is so inefficient that many individuals prefer "self-sufficiency" and produce most or all of the things that they need themselves. Because people different in their ability to produce goods and services of different types, this results in a less efficient allocation of society's resources, which reduces both total production and consumption in the economy. 2. Money serves as a medium of exchange a store of value and a unit of account. The officially-defined money supply in the U.S. economy includes only those things that satisfy all three of these functions. In particular, credit cards (or their upper charge limits) do not constitute a store of value, and so are not included in the officially-defined money supply measures. Credit card charges are essentially short-term loans that, themselves, have to be paid off with things
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Chapter14Summary - Chapter 14 Summary Tucker,...

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