Lets look at two examples first i have a friend who

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Let’s look at two examples. First, I have a friend who installs carpet who has a toothache. He prefers barter exchange to using money in order to avoid income taxes. In order to heal his toothache through barter, he can’t just go to any dentist and pay him with the money he earned from installing a carpet for someone else. Rather, he has to find a dentist who is both willing to fix his toothache and who needs new carpet. It may be difficult to find the right dentist, and in the meantime he still has a toothache. The ability to use money would allow him to find a dentist much more easily. 25
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Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 Second, let’s imagine trying to put together a regular college class without money. Students would only be able to take classes from those professors who want what they have, and are teaching the courses that the student wants to take. Professors would only be willing to teach to those students who have what they want, but the only students willing to take their classes may not have what the teacher needs. For instance, suppose your family consists of chicken farmers. You come to campus with a bunch of chickens and eggs. The only teachers willing to teach you would be those who want or need chickens and eggs. But these teachers may not teach the courses that interest you. Suppose that as a teacher, my family needs toilet paper and toothpaste that day, and my family would like to have steak and potatoes for dinner. I would probably not be willing to teach you with your chickens. But I may not be able to find students with toilet paper, toothpaste, steak or potatoes that are willing to learn economics that day. So my family would have to do without. I hope you can see that money makes it much easier to put together a college class. We don’t have to negotiate with each other; you pay your money to BU and BU pays me. An online course like this would be impossible without money. Why? Unit of account Money allows the measurement and comparison of the value of different goods and services. Money acts as a yardstick, or a common measure of the value of goods, services, and income, so that revenues and costs can be measured through accounting procedures. It would be much more difficult if a farmer had to express his revenues in terms of corn, wheat and soybeans, and his costs in labor hours, pounds of fertilizer, and gallons of water for irrigation. It is much easier to calculate profits when each of these can be expressed in terms of money. Another function of money that we take for granted is that, by acting as a unit of account, money reduces the number of relative prices that we all must keep in our heads. 26
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Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 For example, imagine an economy without money as a numeraire good (a good used to measure the value of everything else). Without money, the value of each good has to be measured in terms of all of the other goods in the economy, which becomes an impossible mental feat as the number of goods in the economy increases.
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