Money

Money: Its Functions and Characteristics

Carla Diggs

XECO/212

22 February 2013

Jim Vernon

People always say that money makes the world go round. Well money does play an important role in economics. Money is used in so many ways such as acting as a unit account, medium of exchange or a store of value. People can be paid their income in money versus products or resources. Money has made it easier because people don’t have to figure out how many oranges or apples they have to have to get something like a TV, house or car. Instead of setting different prices for different resources to equal something, everything has its own unit of account. With that being said, all items such as houses, cars, TVs, foods, gas all have their prices or measurement or unit of account. An example of money as a unit account is that if I wanted to buy a car, I don’t have to figure out how many bananas I need to get a new car. So one price is set instead of going through the trouble of figuring out how many bananas it’s going to take me to get a car. Money also can serve as a medium of exchange. Basically money is used for spending to acquire a resources or product. Money makes it easier to purchase products in different values versus to use products or resources to determine the value of other goods and services. When I decide to purchase a car, I can use money to purchase it. I give the car dealership money and they give me the car. This is what we can call a medium of exchange. Money also has a function as a store of value. As time goes on and we continue to spend money to purchase products that we need and want, we also try to save money too. The store of value method helps save money for the future. This method also can increase your money by interest or by investments. One way you can see the function store of value is by a certificate of deposit or it is better called a CD. You can choose from different CDs from six months to five years in which each time investment...