![]() Instead, we report the value of things in terms of money. Other people may not think of values in pizza terms, so they might not know what we meant. The other is that the information would not be very useful. One is that people do not arrive at places like Radio Shack with five pizzas and expect to purchase a radio. Indeed, the complexity-and cost-of a visit to a grocery store in a barter economy would be so great that there probably would not be any grocery stores! A moment’s contemplation of the difficulty of life in a barter economy will demonstrate why human societies invariably select something-sometimes more than one thing-to serve as a medium of exchange, just as prisoners in federal penitentiaries accepted mackerel.Īsk someone in the United States what he or she paid for something, and that person will respond by quoting a price stated in dollars: “I paid $75 for this radio,” or “I paid $15 for this pizza.” People do not say, “I paid five pizzas for this radio.” That statement might, of course, be literally true in the sense of the opportunity cost of the transaction, but we do not report prices that way for two reasons. That would be an uncertain affair you could not know when you headed for the store which items the grocer might agree to trade. You would need to load up a truckful of items the grocer might accept in exchange for groceries. ![]() Suppose you were visiting a grocery store in a barter economy. Another seller might be willing to provide a haircut in exchange for a garden hose. A buyer might find a seller who will trade a pair of shoes for two chickens. Because no one item serves as a medium of exchange in a barter economy, potential buyers must find things that individual sellers will accept. Barter occurs when goods are exchanged directly for other goods. We can understand the significance of a medium of exchange by considering its absence. To facilitate these exchanges, people settle on something that will serve as a medium of exchange-they select something to be money. The exchange of goods and services in markets is among the most universal activities of human life. We will learn in this chapter that changes in the way people use money have created new types of money and changed the way money is measured in recent decades. If people were to begin accepting basketballs as payment for most goods and services, basketballs would be money. When people use something as a medium of exchange, it becomes money. Money, ultimately, is defined by people and what they do. In Romania under Communist Party rule in the 1980s, for example, Kent cigarettes served as a medium of exchange the fact that they could be exchanged for other goods and services made them money. A medium of exchange is anything that is widely accepted as a means of payment. If cigarettes and mackerel can be used as money, then just what is money? Money is anything that serves as a medium of exchange. ![]() Define what is meant by the money supply and tell what is included in the Federal Reserve System’s two definitions of it (M1 and M2).Distinguish between commodity money and fiat money, giving examples of each.Define money and discuss its three basic functions.She would like to secure these monies for her children in the event of her husband remarrying after her death. If further monies are put into the trust the additional income will be assessed separately. These funds represent approximately 12% of total Arts Council monies. He is responsible for handling fees and other monies due to the court. ![]() Each sum may be from a different source or earmarked for a different purpose. Whichever way you spell it, the plural of “money” is used almost exclusively in formal business contexts.Īlthough “money” has this special plural form, it is still not a countable noun. Both are correct, but, according to my research, “monies” is the more modern spelling. The plural of “money” is spelt in two different ways – “monies” and “moneys”. However, you are probably familiar with the word being used in the plural. Money takes verbs in the singular: Money is… NOT Money are… And it is incorrect to say I found a money under the bed. We would never say I found some monies under the bed / There are some monies under the bed. I found some money under the bed / There is some money under the bed, whether it is one 1 cent coin or ten €100 notes. In everyday English the word “money” is uncountable.
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