Question

In: Economics

a. What’s bad about not having a store of value? Your values decline. You cannot save...

a. What’s bad about not having a store of value?

Your values decline.

You cannot save for a large purchase in the future.

Prices fall.

You have no place to buy values.

b. What’s bad about not having a medium of exchange?

Nobody knows what anything is worth.

Prices rise.

To trade, you must find someone who wants exactly what you have, and has exactly what you want.

People are always exchanging too much or too little, never a medium amount.

c. What’s bad about not having a unit of account?

Nobody knows what anything is worth.

Money can’t be backed by gold.

Accountants are unemployed.

To trade, you must find someone who wants exactly what you have, and has exactly what you want.

Thanks a lot ! :P

Solutions

Expert Solution

A. What’s bad about not having a store of value?

Answer option: You cannot save for a large purchase in the future.

Explanation: not having store of value means, the value of the money is not remain same over the time, it means the value of the money of today is zero in future. Hence you cannot save for a large purchase in the future.

B. What’s bad about not having a medium of exchange?

Answer option: To trade, you must find someone who wants exactly what you have, and has exactly what you want.

Explanation: in exchange you must need two party, and this two party must know the product what they have, if they are agreed to exchange the product among themselves with the help of money, then transaction took place.

C: What’s bad about not having a unit of account?

Answer option: Nobody knows what anything is worth.

Explanation: unit of account features helps in comparing the value between two commodities, which helps us to know which one is more valuable and which one is less valuable. Absence of unit of account will leads to a problem where nobody knows what anything is worth.


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