--%>

Elucidate the use of money as a medium of exchange

Elucidate the use of money as a medium of exchange in Market System?

E

Expert

Verified

1. Money substitutes for barter, which requires a coincidence of wants.  (I may want what you produce but you may not want to exchange for what I have.)

2. Willingness to accept money in place of goods permits 3-way trades (or multilateral trades).

a. Floridians give money to Nebraskans for wheat who give money to Idahoans for potatoes who give money to Florida for oranges.

b. Foreign exchange markets permit Americans, Japanese, Germans, Britons, and Mexicans to complete international exchanges of goods and services.

c. Detroit autoworker produces crankshafts for Buicks.  If the worker were paid in crankshafts, he would have to find grocers, clothing retailers, etc., who would be willing to exchange their products for a crankshaft.  It is much more efficient to use money wages than to accept one’s wages in crankshafts!

   Related Questions in Business Economics

  • Q : Illustrate the Risks involved with bonds

    Illustrate the Risks involved with bonds?

  • Q : How do you account for the dominant

    How do you account for the dominant role of corporations in the U.S. economy?

  • Q : The Federal corporate income tax Use

    Use the circular flow model to confirm this assertion for a 2% reduction in the Federal corporate income tax.

  • Q : Illustrate the rate of exchange of two

    Illustrate the rate of exchange of two products?

  • Q : Supply and demand at tax burdens and

    The new supply and demand curves within University City are S0 and D0. But after the county commission imposed at $3 per six-pack excise tax upon beer: (w) beer sellers' revenue after taxes decreases by $60,000 monthly. (x) buyers and sellers eac

  • Q : Analysis of US GDP and GDP growth rate

    You may use a calculator and MINITAB to conduct the necessary calculations for all questions.  Analysis of US GDP and GDP growth rate (1959-2004). The following variables can be retrieved from MIN

  • Q : High-convexity portfolios outperform

    a) Whether the bond market moves up or down, high-convexity portfolios will for all time outperform low-convexity portfolios of equal duration and yield." Elucidate the argument supporting this statement and the connection to the classical immunization strategy. What

  • Q : Organization of employees-Division of

    ‘Mama’ Jean consists of one employee bake crumbly, graham cracker crusts at Mama’s Home-Pies, whereas the other stirs gooey, hot, apple filling. Her staff is organized in accord with a/an: (1) Task management system. (2) Division of labor. (3) Compar

  • Q : Comparison between EVA and Ratio

    Comparison between EVA and Ratio Analysis: EVA helps in measuring the economic performance of the company. It is the profit earned by the firm less the cost of financing the firm’s capital. It shows that the shareholders gain when the return fro

  • Q : Example of public goods Drinking at a

    Drinking at a public water fountain is: (w) a public good because anyone may drink from it. (x) results in a negative externality because others can’t drink from this at similar time. (y) a positive externality because you are benefiting by other’s provisi