Podcast
Questions and Answers
What fundamental characteristic must money possess to facilitate trade efficiently?
What fundamental characteristic must money possess to facilitate trade efficiently?
- It must be immediately exchangeable for marketable assets. (correct)
- It must be a form of credit.
- It must be electronic.
- It must be backed by gold.
Which criterion is crucial for a commodity to be widely accepted as money?
Which criterion is crucial for a commodity to be widely accepted as money?
- It must be widely accepted as a medium of exchange. (correct)
- It must be difficult to transport.
- It must decompose quickly.
- It must be intangible.
Which is NOT a necessary criterion for a commodity to be considered money?
Which is NOT a necessary criterion for a commodity to be considered money?
- Durability
- Intangibility (correct)
- Portability
- Divisibility
What is the primary measure of wealth in an economy?
What is the primary measure of wealth in an economy?
Why do individuals accept money in transactions?
Why do individuals accept money in transactions?
Currency is a term often used interchangeably with money, especially when referring to physical forms like bills and coins.
Currency is a term often used interchangeably with money, especially when referring to physical forms like bills and coins.
Money must be legally recognized by the government to serve as a medium of exchange.
Money must be legally recognized by the government to serve as a medium of exchange.
Divisibility is one of the criteria that money must meet to be widely accepted.
Divisibility is one of the criteria that money must meet to be widely accepted.
Money must degrade quickly to facilitate trade and serve as a primary measure of wealth.
Money must degrade quickly to facilitate trade and serve as a primary measure of wealth.
Standardization of value is an unimportant characteristic for a commodity to be accepted as money.
Standardization of value is an unimportant characteristic for a commodity to be accepted as money.
Study Notes
Definition of Money
- Economists define money as a medium of exchange that is widely accepted in payment for goods or services or in the repayment of debts
- Money is any good that is widely used and accepted in transactions involving the transfer of goods and services
Characteristics of Money
- Standardization: must be easily standardized, making it simple to ascertain its value
- Acceptability: must be widely accepted as a medium of exchange
- Divisibility: must be divisible so that it is easy to make change
- Portability: must be easy to carry
- Durability: should not degrade quickly
Functions of Money
- Serves as a medium for expressing prices and values
- Facilitates trade
- Serves as the primary measure of wealth
- Is immediately exchangeable for all kinds of marketable assets, such as goods and services, real estate, or whatever
Early Economy: Barter System
- Initially, an exchange of goods in an economy with an emphasis on self-sufficiency
- Limited by the "coincidence of wants" problem, where two parties must have what the other wants at the same time
Evolution of Money
- Any commodity chosen by common consent as a medium or instrument of exchange
- Other commodities are expressed and valued in terms of that commodity regarded as money
Definition of Money
- Economists define money as a medium of exchange that is widely accepted in payment for goods or services or in the repayment of debts
- Money is any good that is widely used and accepted in transactions involving the transfer of goods and services
Characteristics of Money
- Standardization: must be easily standardized, making it simple to ascertain its value
- Acceptability: must be widely accepted as a medium of exchange
- Divisibility: must be divisible so that it is easy to make change
- Portability: must be easy to carry
- Durability: should not degrade quickly
Functions of Money
- Serves as a medium for expressing prices and values
- Facilitates trade
- Serves as the primary measure of wealth
- Is immediately exchangeable for all kinds of marketable assets, such as goods and services, real estate, or whatever
Early Economy: Barter System
- Initially, an exchange of goods in an economy with an emphasis on self-sufficiency
- Limited by the "coincidence of wants" problem, where two parties must have what the other wants at the same time
Evolution of Money
- Any commodity chosen by common consent as a medium or instrument of exchange
- Other commodities are expressed and valued in terms of that commodity regarded as money
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Understand the economic definition of money, its purpose, and why it's widely accepted in transactions involving goods and services.
