Money As Defined In The Textbook Is An Asset That Is Generally

1495 WordsMay 3, 20176 Pages
Money as defined in the textbook is an asset that is generally accepted as payment for goods and services or repayment of debt, acts as s unit of account, and serves as a store of value. Money was originally any physical substance that was desired by others, such as gold, silver, or even cattle. Today when someone mentions money you think of bills or coins, debit card and credit card. However, for the purpose of economics, money actually has three distinct uses, some of which are not adequately covered in the above definition. These uses are: means of payment, a unit of account, and a store of value. Means of payment is the characteristic of money that allows it to be used for purchasing, units of account can be used to quote and record…show more content…
Future value is the present value of an initial investment times one plus the interest rate for each year you hold it. The higher the interest rate, the higher the future value will be. Present value is equal to the value of today of a payment made on a future date. Meaning the higher the payment, the higher the present value at a given interest rate. The higher the interest rate, the lower the present value of a given payment. The longer the time until the payment is made, the lower the present value of a give payment at a give interest rate. For a given increase in the interest rate, the present value of a promised payment is to be made must be measured in the same time units. Financial markets perform the essential function of channeling funds from economic players that have saved surplus funds to those that have a shortage of funds. At any point in time in an economy, there are individuals or organizations with excess amounts of funds, and others with a lack of funds they need for example to consume or to invest. Financial markets can be categorized as primary and secondary markets and debt and equity markets. Primary markets are markets in which financial instruments are newly issued by borrowers. Secondary markets are markets in which financial instruments already in existence are traded among lenders. Debt and equity markets are where the instruments are used primarily for financing are traded versus derivative

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