5 Questions
What is the main difficulty of the barter system?
Lack of double coincidence of wants
What are the three main uses (functions) of money?
Medium of exchange, unit of account, store of value
What is the meaning of money?
Medium of exchange, unit of account, means of payment
What is necessary for money to be useful regardless of its form?
Widely accepted by buyers and sellers
What is the direct exchange of goods for goods called?
Barter
Study Notes
Barter System and Money
- The main difficulty of the barter system is the lack of a double coincidence of wants, meaning that both parties must have what the other wants at the same time.
- The direct exchange of goods for goods is called barter.
Functions of Money
- The three main uses (functions) of money are:
- Medium of exchange: money enables the exchange of goods and services
- Unit of account: money provides a standard unit of value for goods and services
- Store of value: money allows individuals to save for the future
Definition and Characteristics of Money
- The meaning of money is the widely accepted medium of exchange, unit of account, and store of value in an economy.
- For money to be useful regardless of its form, it must be:
- Portable: easy to transport
- Divisible: able to be divided into smaller units
- Durable: able to withstand wear and tear
- Acceptable: widely accepted as a medium of exchange
- Stable: maintains its value over time
Test your knowledge of money and banking with this quiz! Explore the various forms of money throughout history and its role as a medium of exchange and unit of account. From traditional coins to modern virtual currency, see how money has evolved as a means of payment and value exchange.
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