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Midterm - Karina Santana Money and Banking Midterm...

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Karina Santana September 26, 2011 Money and Banking Midterm Examination 1. I agree with the statement “gold may be a better store of value than money, but it would function as a poorer medium of exchange and unit of account than US money”. I agree because gold itself is very valuable as oppose to our medium of exchange which is a simply paper, but that paper has a face value. The US dollar has a face value that we use to purchase and sell goods and services. That face value comes with many different prices such as the single bill, five dollar bill, twenty, fifty and one hundredth, also there are also the coins that we use like the penny, nickel, dime and quarter. Since the US money has so many different face values it makes it easier for us to pay the correct amount of what something cost as oppose to gold, which you cannot break in half. For example: lets suppose that a gold brick is worth $1,000.00 and I wanted to buy a pair of sneakers that cost $100, then I will have a problem if I was to pay with the gold brick because I cannot break it in half or into pieces. This is the reason why gold is such a poor medium of exchange.
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