Chapter 10 - part 1

Chapter 10 - part 1 - Chapter 10: Money, Prices and the...

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Money Some generally accepted form of currency has been used in many societies in order to facilitate exchanges of goods among people. Before common currencies were circulated, especially in less developed regions, barter systems were used. Through barter , goods and services were exchanged for other goods or services . Barter is not a perfect way of trading since it requires a double- coincidence of wants . If I wanted to buy something, the seller had to also desire what I had to offer in exchange. Ex : I wanted to buy some chicken, and I could offer potatoes in exchange. I had to find someone who sells chicken and wants potatoes. Chapter 10: Money, Prices and the Federal Reserve
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Money Barter systems discouraged specialization : people benefited more if they became good at providing the majority of goods and services for themselves. Money is any asset that can be used to make a purchase . Examples : cash, checking account balance. The paper and metallic forms of currency are only recent forms of money. In the past, goods that were viewed as having an intrinsic value to all people have been used for exchange. For example : coffee beans, shells, beads, feathers, grain, gold and silver. Chapter 10: Money, Prices and the Federal Reserve
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Money and Its Functions 1. Money serves as a medium of exchange : The alternative to a barter system is to exchange goods and services for money . This is much more efficient since everyone in the economy recognizes the value of money, and money is backed by the issuer. 1. Money is a unit of account : Money serves as a basic measure of economic value . By placing a dollar value on different goods and services, their economic values can easily be compared. Ex : comparing the prices of goods, comparing wages, etc. Chapter 10: Money, Prices and the Federal Reserve
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Money and Its Functions 1. Money serves as a store of value : Money is a way of holding wealth . Either holding cash or a checking account balance is a way of holding wealth. Chapter 10: Money, Prices and the Federal Reserve
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Money and Its Functions Private Money Government issued money is the most widespread, but private individuals or firms can also issue money. The three functions of money have to be fulfilled. There has to be trust from all those who use it that: The money will be accepted for goods or services. It can store value and be used in the future as well.
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Chapter 10 - part 1 - Chapter 10: Money, Prices and the...

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