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English Economy
English Economy
money makes
it possible for businesses to obtain what they need from suppliers and for
consumers to obtain goods. money is defined as anything customarily used as a
medium of Exchange a unit of accounting and a store of value. the basis of the
market economy is voluntary Exchange. in the American economy, the exchange usually
involves money in the return for a good or service
.... The Functions of Money ......Most Americans think of money as bills, coins,
and checks. Historically, and in other cconomies, money might be shells, gold, or
even goods such as sheep. Economists identify money by the presence or absence of
certain functions. Anything that is used as a medium of exchange, a unit of
accounting, and a store of value is considered money for example, Native Americans
used wampum- beads made from shells. Fijians have used whales' teeth. There are
three functions of money
***Medium of Exchange. To say that money is a medium of exchange simply means that
a seller will accept it in exchange for a good or service. Most people are paid for
their work in money, which they then can use to buy whatever they nccd or want.
Without money people would have to barter - cxchange goods and service for other
goods and services. Suppose you worked in a grocery store and were paid in
groceries because money did not exist. To get whatever you needed, such as clothes
and housing. you would have to find people who have the goods that you want. In
addition, those peaple would have to want the exact goods - in this casc, groccries
that you have Barter requires what economists call a double coincidence of wants
Each party to a transaction must want exactly what the other person has to offer.
This situation is rare. As a result, pcople in societies that barter for goods
spend great amounts of time and effort making uades with one another. Bartering can
work only tn small societies with fairly simple economic systems
***Medium of Exchange. To say that money is a medium of exchange simply means that
a seller will accept it in exchange for a good or service. Most people are paid for
their work in money, which they then can use to buy whatever they need or want.
Without money people would have to barter - exchange goods and service for other
goods and services. Suppose you worked in a grocery store and were paid in
groceries because money did not exist. To get whatever you needed, such as clothes
and housing. you would have to find people who have the goods that you want. In
addition, those people would have to want the exact goods - in this case,
groceries- that you have. Barter requires what economists call a double coincidence
of wants. Each party to a transaction must want exactly what the other person has
to offer. This situation is rare. As a result, people in societies that barter for
goods spend great amounts of time and effort making trades with one another.
Bartering can work only in small societies with fairly simple economic systems