ECO 2013 Lecture Notes - Lecture 19: Market Liquidity, Commodity Money, Costco
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14. 1 what is money and why do we need it? (continued) Vocab: anything used as money must fulfill these four functions, (1) medium of exchange. Money is acceptable to a wide variety of parties as a form of payment for goods and services. People must accept it in exchange for goods and services. More efficient: everyone knows what they need to make a transaction, you can make purchases in fl and dc and not have to, (2) unit of account change our money. Money allows a way of measuring value in a standard manner. Money allows people to defer consumption till a later date by storing value. If you have cash in your pocket tonight, you can use it to buy of goods tomorrow. Other assets can do this too, but money does it particularly well because it is liquid, easily exchanged for goods.