What are the main functions of money?
What will be an ideal response?
Money serves in general three important functions: a medium of exchange; a unit of account; and a store of value. As a medium of exchange, money avoids going back to a barter economy, with the enormous search costs connected with it. As a unit of account, the use of money economizes on the number of prices an individual faces. Consider an economy with N goods, then one needs only (N - 1 ) prices. As a store of value, the use of money in general ensures that you can transfer wealth between periods.
You might also like to view...
In the calculation of gross domestic product by the expenditure approach, the "investment" component is
A) net investment. B) gross investment minus depreciation. C) gross investment plus depreciation. D) gross investment.
If economies of scale allow one cable TV firm to supply the entire market at the lowest possible cost, then this company is
A) a natural monopoly. B) not a monopoly. C) a monopoly, but not a natural monopoly. D) a legal monopoly.
While taxing inelastic goods minimizes social costs from taxation, it frequently conflicts with traditional notions of fairness
a. True b. False
When a transfer price is set higher
a. the buying division will chose to purchase less from the selling division b. the buying division will chose to purchase more from the selling division c. the selling division will chose to purchase less from the buying division d. the selling division will chose to purchase more from the buying division