Economics chapter 1 - 3 functions of money

Medium of Exchange

- Anything that is generally accepted in exchange for goods and services - Using money promotes economic efficiency by minimizing the time spent in exchanging goods and services - Using money saves us the trouble of trying to figure out what items the seller is willing to accept in exchange for another good

Store of Value

- Gives the ability of an item to hold its value over time - Houses and artwork hold their value as well/better than money - Money can also lose value during inflationary periods, but it can also gain value during deflation periods. - Losing value means having lost buying power

Three functions of money

- Medium of exchange - Store of value - Unit of account - These functions make it easier for us to get goods and services.

Unit of Account

- Used to measure value in the economy - Money can be used as the common denominator valuing goods and services, easing the comparisons of relative value. Without money, price tags would have to specify exactly what option are available b/w every barterer