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In: Economics

Gold was used as money in many societies around the world. List at least four characteristics...


Gold was used as money in many societies around the world. List at least four characteristics of gold which make gold suitable as money and EXPLAIN why each characteristic makes gold suitable as money. Include one characteristic of gold that it is NOT widely used in any industry and explain why this uselessness has made people seek gold in an economic crisis

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Expert Solution

Four characteristics of Gold which make it suitable as money

1) Gold is such a precious metal ,though it is abundant yet its high popularity has made it valuable

2) Gold provides sustainable store of value as it doesn't readily oxidise .It is not fragile and durable due to this feature,it maintains a constant weight

3) Gold is used in making jewellery as it is symbol of wealth,prestige,grandeur and prosperity.

4) Gold is useful in the context of being easily hoardable, manageable and transportable metal ,as it is 20 times as dense as water and twice as dense as lead.A high value of money can be moved around easily in a very small lot size if it is in the form of gold.

One unique characteristic of gold that makes it useless in any industry and useful in economic crisis

* Increase in the value of gold overtime

This characteristic of gold makes it useless for being used as an inflatable metal as heat conductor in manufacturing industry.The reason is, if input cost goes on increasing overtime,it will increase cost of production

But at the same time, this characteristic acts as a boon for people as due to high rate of inflation in the economy usuasally brings down the purchasing power of currency but the value of this precious metal goes on increasing.

Thus people hoard it to ensure that the accumulation of gold will add to their wealth.

Rahul Sunny answered 2 years ago
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