REACTION PAPER

Money, in its broadest sense, is something that is widely recognized as a medium of

exchange for goods and services. In other words, the functions of money in the economy
determine it. Money has taken many forms throughout history, including cowry shells, furs,
beads, and even huge stone wheels, but all useful forms of money serve three basic functions.
Money's ability to perform its purposes has limits, even when you have money to buy products
and services, as in the accountant/ mechanic example. Inflationary rates, for example, make
money less valuable in a variety of ways. First, when inflation is high, the longer you keep
money as currency, the less value it has, so you want to spend it as soon as possible rather
than keep it. Money is no longer an efficient store of value in this case. In reality, if people
anticipate high inflation and raise the pace of their transactions as a result, inflation would rise
even higher. The gainers during inflation are the Debtors. Among the gainers during inflation are
the following; (1) The first group of gainers are people who have flexible incomes. (2) The
second group of gainers during inflation are the speculators. And (3) The third group of gainers
are the Debtors gain from inflation because they repay creditors with dollars that are worth less
in terms of purchasing power. Demand-pull inflation occurs when aggregate demand for goods
and services in an economy rises more rapidly than an economy’s productive capacity. One
potential shock to aggregate demand might come from a central bank that rapidly increases the
supply of money. There are many reasons for a demand-pull inflation to occur. First, A growing
economy. When consumers feel confident, they spend more and take on more debt. This leads
to a steady increase in demand, which means higher prices, and Asser Inflation. A sudden rise
in exports forces an undervaluation of the currencies involved. When inflation is high and
unpredictable, money encourages transactions in ways that keep the economy running
smoothly. A low and steady rate of inflation, on the other hand, ensures that money performs its
functions effectively.

Investment is a term used to describe an asset that is purchased or invested in order to

create wealth and save money from hard-earned income or appreciation. The primary goal of
investing is to achieve a second source of income or to benefit from the investment over a set
period of time. Investing is necessary, if not essential, if you want your money to work for you.
You work hard for your money, and it should return the favor. The bank, on the other hand, is
not breaking a sweat by paying you to keep your money in their vault. It is your responsibility to
put your money to work. Investment and Output People earn more revenue as a result of the
initial increase in spending, which is then invested, creating an increase in AD. In the long run, a
strong multiplier effect may lead to a larger increase in AD. Investment and the stock. A stock is
a form of investment that represents a portion of a company's ownership. Stocks are purchased
by investors who believe they will increase in value over time. An investment is a portfolio.
When you buy a share of a company's stock, you're buying a little piece of the company.
Investors buy stocks of businesses they believe would appreciate in value. If this occurs, the
value of the company's stock rises as well. After that, the stock can be sold for a profit. Saving
money is vital first and foremost because it protects you in the case of a financial emergency.
Furthermore, saving money will assist you in making major purchases, avoiding debt, reducing
financial stress, leaving a financial footprint, and gaining a greater sense of financial
independence.
 Without stocks and bonds, most of the world's economic operation will be unlikely. Stocks
and bonds are certificates that are issued in order to raise funds for the start-up or expansion of
a company. Stocks and bonds are often referred to as shares, and those who purchase them
are referred to as investors. Stocks have a higher potential for long-term returns than bonds, but
they also carry a higher risk. Bonds are more resilient than bonds, but they have historically
produced lower long-term returns. Diversifying your portfolio means buying a variety of different
assets. The reason why the equities market burst in 2008 are: Since so many people took out
loans they couldn't afford, the stock market collapsed in 2008. Lenders loosened their stringent
lending rules in order to give credit to people who didn't meet the criteria. This pushed up house
prices to levels that many people couldn't afford otherwise. And, The stock market collapsed
after Congress rejected a bank bailout bill. 2 The stresses that led to the crash, on the other
hand, had been building for quite some time.