What is money and what important function does it perform? Explain how it overcomes the disadvantages associated with barter. What conditions are necessary for people to accept paper currency in exchange for the goods and services which they sell?
Please provide the best answer for the statement.
Money is anything that is generally acceptable as a medium of exchange. In the United States economy, money includes currency, coins, and checkable deposits.
Barter requires a coincidence of wants between the two parties to a transaction. Each has to want what the other has to offer. Money makes this coincidence unnecessary, as the seller is willing to accept money in exchange for goods or services offered and can, in turn, exchange the money earned for other goods and services from another seller. The necessary condition for the use of paper currency is that it must be generally acceptable. Sellers must have faith that the currency will have value when they want to use it to buy goods and services for themselves.
Note that the money does not have to have any intrinsic value; that is, it does not have to be backed by a material that has some use like gold or silver.
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