Question

In: Economics

Author Anna Schwartz writes this about money: “The U.S. money supply comprises currency—dollar bills and coins...

Author Anna Schwartz writes this about money: “The U.S. money supply comprises currency—dollar bills and coins issued by the Federal Reserve System and the Treasury—and various kinds of deposits held by the public at commercial banks and other depository institutions such as savings and loans and credit unions.” (Schwartz, n.d) In this threaded discussion, complete the following:

1) Discuss the concept of money. First, define the functions of money and explain how currency meets these functions.

2) Historically, a number of things other than coin and currency have been used as money. Using outside research, provide an example of something else that has been used as money, and explain when and where it was used. Do NOT use the examples in the text!

Solutions

Expert Solution

Money is any object accepted by an economy or a particular country , which can be used in the form of payment for purchasing goods or services or paying debt. The main objectives of having money is :

i. a medium of exchange

ii. a unit of account

iii. a store of value

iii. sometimes acts as a standard of differed payment

1. Money is an economic and it functions as a medium of exchange. It is used for transaction purpose in an economy. Each government has its own money system. Money is a liquid asset used for the settlement of transactions. It is helpful for conducting foreign exchange depending upon the acceptance of its value.  

A currency should be portable, stable, durable, recognisable and fungible.

2.The use of money in the form of currency helps buying and selling goods and services in the market. Money system replaced barter system, which was existed in the past. Monetary helps to overcome the situation of double coincidence of wants. It was the problem with the barter economy. In barter economy, each party must have something to exchange what the other one wants. Otherwise no trade will take place. In case of monetary currency, there is no such problem. Anybody can purchase any amoarunt of goods and services, anytime anywhere in the world, according to the monetary value of the currency the person is having in his hand.


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