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Checkpoint Money

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CheckPoint - Money

Steven A. Tijerina
XECO/212 Principles of Economics
April 21, 2012
Jason Kelley

Money

Moneys acts as a unit of account by providing a measure of the value of exchanged services and goods. Understanding monetary value enables suppliers and purchasers to make sound decisions on the number of goods to purchase and the number of goods to supply. Money is used as a medium of exchange when completing any financial transactions, for example, if money did not exist then the only recourse would be to barter by directly exchanging goods and services. The downside of bartering to obtain a good you must have a good of equal value that the other party wants or needs. Another flaw to bartering is the double coincidence of wants, which makes transactions much more difficult to complete because one party does not need what the other party has. Money eliminates the barter system because money is used as a medium of exchange for transactions by all the parties involved. Store of value is a medium of exchange only when money retains its value, in other words, $1000 in the present economy retains the same monetary value 10, 15, 20 years down the line; however, inflation and cost of living decrease the value of money as prices rise. Money is not the only store of value, for example, others include artwork, postage stamps, gold, and land or similar valuable goods. Money is liquid compared to other mediums of exchanges because money is accepted worldwide; more over money is available in various dominations. To pay for online purchases I checkout with PayPal I do not have funds; however, I have a credit line and I use that as a medium of exchange to acquire goods and services.

References
Principles of Economics, Fourth Edition, by N. Gregory Mankiw
Tomlinson

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