Copy of Section 5 Test FRQ.docx - Section 5 FRQ Test Answer the following questions 1 2 3 4 Explain the 3 roles of money a Money is a store of value

Copy of Section 5 Test FRQ.docx - Section 5 FRQ Test Answer...

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Section 5 FRQ Test Answer the following questions: 1. Explain the 3 roles of money. a. Money is a store of value - Holding money will maintain its value for days, weeks, months, and even a year to come. Holding money is more effective than holding other items of value, such as produce, because it’ll rot and lose its value. However, money is not a perfect store of value either; inflation slowly erodes the value of money and lowers the purchasing power slowly over time. b. Money is a unit of account - Money is a common measure of value across the US and its economy. It translates over on different accounts and products, which all have a comparison value, but money’s the common base that helps us understand its value and the value of items in our country. c. Money is a medium of exchange - Money is a method of payment/exchange that is widely used in America. US money says “This note is legal tender for all debts, public and private.” This is your right to pay with US dollars, provided to you by the government. 2. Explain the 3 types of money. a. Commodity Money - Unlike other forms of money, this type has a store of value. We can physically see and feel the value, no matter if other people/states/nations or places don’t use it. This is the complete opposite of fiat money, which the government dictates its value. Commodity money includes gold, silver, tobacco, and back then seashells and salt. You could take this out of

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