ECO102H1 Lecture Notes - Precious Metal, Gold Certificate, Fiat Money

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5 Sep 2012
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ECO102H1 Full Course Notes
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ECO102H1 Full Course Notes
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Money is defined as any general accepted medium of exchange. Medium of exchange: anything that generally accepted in return for goods and services sold. Money also acts as store of value and as a unit of account. Barter: a system in which goods a services are traded directly for other goods and services. The major difficulty with barter is that each transaction requires a double coincidence of wants meaning anyone who specialized in producing one commodity would have to spend a great deal of time searching for satisfactory transaction. The use of money as a medium of exchange solves this problem, as people can sell their output for money and then in separate transaction, use the money to buy what they want from others. The double coincidence of wants is unnecessary when a medium of exchange is used. Money greatly contributes to the efficiency of the economic system.