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Unformatted text preview: The third function of money, as a store of value, is one that we all know well. When you work, you are paid a wage. The portion of that wage that you do not spend gets saved. By saving money, you are able to spend some now and some later. In this way, money serves as a store of value, allowing you to trade current consumption for future consumption. Imagine if you were paid in bananas. Any bananas that you did not eat or trade immediately would rot, rendering you unable to enjoy the fruits of your labor at a later time. The fourth and final function of money, as a means of liquidity, is important for an economy to move beyond a simple system of bartering. Imagine that you have 30 apples, and you really want a steak. You walk to the local restaurant and ask the waiter if you can trade 30 apples for a steak. He informs you that they have plenty of apples, if you can trade 30 apples for a steak....
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10