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Questions and Answers
What is the primary function of money that allows individuals to exchange goods and services with one another?
What is the primary function of money that allows individuals to exchange goods and services with one another?
- Store of Value
- Measure of Value
- Medium of Exchange (correct)
- Unit of Account
What is the function of money that enables the creation of contracts and debt agreements?
What is the function of money that enables the creation of contracts and debt agreements?
- Medium of Exchange
- Standard of Deferred Payment (correct)
- Means of Transfer
- Unit of Account
What is the benefit of money's functions that allows for the creation of credit and debt markets?
What is the benefit of money's functions that allows for the creation of credit and debt markets?
- Facilitates economic growth and development
- Allows for the creation of credit and debt markets (correct)
- Enhances market efficiency
- Provides a sense of security and stability
What is the primary function of money that serves as a standard unit of measurement for the value of goods and services?
What is the primary function of money that serves as a standard unit of measurement for the value of goods and services?
What is the benefit of money's functions that enables specialization and division of labor?
What is the benefit of money's functions that enables specialization and division of labor?
What is the function of money that facilitates the transfer of value from one person to another?
What is the function of money that facilitates the transfer of value from one person to another?
Study Notes
Functions of Money
Primary Functions
- Medium of Exchange: Money acts as an intermediary in trade, allowing individuals to exchange goods and services with one another.
- Unit of Account: Money serves as a standard unit of measurement for the value of goods and services.
- Store of Value: Money allows individuals to store value for future use, providing a way to save and invest.
Secondary Functions
- Standard of Deferred Payment: Money enables the creation of contracts and debt agreements, allowing individuals to borrow and lend.
- Measure of Value: Money provides a way to compare the value of different goods and services.
- Means of Tranfer: Money facilitates the transfer of value from one person to another, both domestically and internationally.
Importance of Money's Functions
- Enables specialization and division of labor
- Facilitates economic growth and development
- Provides a sense of security and stability
- Enhances market efficiency and facilitates trade
- Allows for the creation of credit and debt markets
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Description
Understand the primary and secondary functions of money, including its role as a medium of exchange, unit of account, and store of value. Learn how money's functions enable economic growth, specialization, and market efficiency.
