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Unformatted text preview: Functions of Money Money is often defined in terms of the three functions or services that it provides. Money serves as a medium of exchange , as a store of value , and as a unit of account. Medium of exchange. Money's most important function is as a medium of exchange to facilitate transactions. Without money, all transactions would have to be conducted by barter , which involves direct exchange of one good or service for another. The difficulty with a barter system is that in order to obtain a particular good or service from a supplier, one has to possess a good or service of equal value, which the supplier also desires. In other words, in a barter system, exchange can take place only if there is a double coincidence of wants between two transacting parties. The likelihood of a double coincidence of wants, however, is small and makes the exchange of goods and...
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This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10