E305-HW1 - Ryan Alexander Homework 1 Money and Banking 1...

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Ryan Alexander Homework 1 Money and Banking 1. You could pay with your morning cup of coffee, first of all, with cash. Cash is accepted nearly anywhere and will not be declined for any reason. A disadvantage of the cash is that it is harder to keep track of and less convenient than a credit card or some other form of payment. Second, you could pay with a debit card. This card transfers funds from your bank account to the bank of the merchant. Advantages of this form of payment are that it is easier to keep track of and less likely to have money taken from you. Another advantage is that some accounts accumulate more money, or “points” the more that they are used. The disadvantage is that they are not always accepted anywhere. The third way that you could pay for that morning cup of coffee is a credit card. Advantages of a credit card are basically the same as a debit card. Easy to carry and quick to pay. The disadvantages of a credit card are the fact that you get charged a certain percentage to use the card and borrow the money, rather than getting money back for using it. Also, the card holder may get too in debt and not be able to pay off the debt. 2. The dollar could still function as the unit of account in a totally cashless society because it could be a source of fiat money. It could be worth something to someone who would exchange a good for it, even if it isn’t accepted in the general society.
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