Question

Many things have been used as money over time: cigarettes, gold, paper currency (like the U.S. dollar), etc. Describe the functions of money and consider the U.S. dollar as an example. Although the U.S. dollar has little or no intrinsic value, why do people want it so much? Can you think of other examples of things that act as “money” in our society? please type answer

Answer 1

Money is first of all unitary (everyone can exchange anything with money). No other thing has this feature. Like cigarette can be exchanged with other thing if and only if other person want cigarette. Also money is easier to carry and can be easily stored. We can store and carry 1000 of dollars but it would be carry gold this way. People want money as it is universally accepted i.e. everyone will exchange goods with money. Digital money is an example these days that act as paper money.

FUNCTIONS OF MONEY

Money is any good that is widely accepted in exchange of goods and services, as well as payment of debts. Most people will confuse the definition of money with other things, like income, wealth, and credit. Three functions of money are:

1. Medium of exchange: Money can be used for buying and selling goods and services. If there were no money, goods would have to be exchanged through the process of barter (goods would be traded for other goods in transactions arranged on the basis of mutual need). For example: If I raise chickens and want to buy cows, I would have to find a person who is willing to sell his cows for my chickens. Such arrangements are often difficult. But Money eliminates the need of the double coincidence of wants. you can buy anything against the US dollar.

2. Unit of account: Money is the common standard for measuring relative worth of goods and service. the US dollar is accepted everywhere for goods and services.

3. Store of value: Money is the most liquid asset (Liquidity measures how easily assets can be spent to buy goods and services). Money’s value can be retained over time. It is a convenient way to store wealth.

Although the U.S. dollar has little or no intrinsic value but it has market value. it can be used to buy things. the note may not have any materialistic value but it has the value that fed bestowes onto it. thus US dollar can be traded for any good or service and is a very liquid currency. people use it as a medium of exchange and it is a trusted currency.

examples of things that act as “money” in our society are:

Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, Wampum, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc.

now we have debit cards, credit cards,bonds, cheques, gold, silver,