Concept explainers
The meaning of money.
Explanation of Solution
The barter system was a market exchange system that existed in the ancient period. According to the barter system, one commodity is exchanged for another commodity in the market. Thus, there should be double co-incidence of needs for the exchange to take place in the market. This problem was corrected with the establishment of money. Money is anything that serves as a medium of exchange in the market, unit of account as well as the store of value in the economy. There are many forms of money such as paper currencies, metallic coins, bills, and so forth.
Thus, money is worthless on its own. It becomes worthy when it is used for the purposes stated above. However, in this case, an individual is lost in the dessert and he has a million dollars with him. However, he cannot make use of his money to do any transaction, as there is no market in the dessert, and hence the money becomes worthless. Thus, this teaches the person that money is worthless when it is not used for transaction, store of value, and unit of account purposes.
Money: Money is anything that has basically three functions such as the medium of exchange, unit of account, and store of value in an economy.
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Chapter 24 Solutions
BUNDLE: ECONOMICS FOR TODAY, 10TH + MIN
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