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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

In many casinos, a person buys chips to use for gambling. Within the casinos wafts, customers often can use these chips to buy food and drink or even a hotel room. Do chips in a gambling casino serve all three functions of money?

To determine

Whether the use of chips in gambling serves the functions of money or not is to be determined.

Explanation

It is assumed that the person buys the chips which can be used for gambling. If the chips are maintained within the walls of casino then, it would serve all the three functions of money which are medium of exchange, a unit of account and store of value. In the case of medium of exchange, chips can be used both by the buyer and seller. The seller can sell the drinks and food in exchange of chips within the casino.

In the case of unit of account, it can be used through which other goods can be measured. A common denominator is set and used for goods and services. In the case of store of value, money is used to buy the products and services in future. Hence, chips were also used in order to buy food and beverages in future.

Concept

Money supply is defined as the aggregate of the money which is available in the economy at a specific time period. It is mainly regulated by the government and the other financial bodies. In order to make the change in the money supply, both the expansionary and Contractionary policies are used. M1 and M2 are the measures of money supply.

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