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Chapter 24

Economics Chapter 24 Textbook Notes

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Western University
Economics 1022A/B
Jeannie Gillmore

Economics Chapter 24 Notes Feb 6 What is Money y Money any commodity or token that is generally acceptable as a means of payment y Means of payment a method of settling a debt y Money serves three other functions o Medium of exchange o Unit of account o Store of value Medium of Exchange y Any object that is generally accepted in exchange for goods and services y Without it goods and services must be exchanged directly for other goods and servicesan exchange called a barter y A barter requires a double coincidence of wants a situation that rarely occurs o Eg you want to exchange your hamburger for a CD but you have to find someone willing to do that y Medium of exchange overcomes the need for a double coincidence of wants y Money isnt the only medium of exchange you can use a credit card Unit of Account y Unit of account an agreed measure for stating the prices of goods and services y To get the most out of your budget you have to figure out whether seeing one more movie is worth its opportunity cost Store of Valuey Money is a store of value in the sense that it can be held and exchanged later for goods and services o If money werent it couldnt serve as a means of payment y The more stable the value of a commodity or token the better it can act as a store of value and the more useful it is as money y The value of a house car art fluctuate over time y The value of the commodities and tokens that are used as money also fluctuate over time y Inflation lowers the value of money and the values of other commodities and tokens that are used as money y To make money as useful as possible as a store of value a low inflation rate is needed Money in Canada Today y Money consists of o Currency
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