Checkpoint Money

Topics: Money, Store of value, Currency Pages: 1 (287 words) Published: September 21, 2010
Checkpoint: Money

Unit of account: This function of money means that money is used as the common foundation to determinate the prices of goods traded throughout the economy. Unit of account, or measure of value, means money is functioning as the measuring units for prices. In other words, prices of goods are claimed in terms of a common monetary unit. Unit of account lends meaning to losses and profitability. Currencies are usually used as a unit of account but objects can also be used, such as gold or silver. Example: a dozen of eggs costs $2.00 and the price of a gallon of milk is $4.00, without the common unit account I would say that the dozen of eggs costs ½ of a gallon of milk.
Medium of Exchange: When something is used throughout the economy as an intermediary instrument to facilitate payment for goods and services. One commodity in exchange for another and no exchange can occur unless the parties involved desire precisely what the other has to offer. Example: When I offer to clean my friends house in exchange for help with my math class, in this case I am offering a service in exchange of another service, the service we offer to each other is being used as money.

Store of Value: This function means that money can be used to purchase the same quantity of goods and services that provide the same consumption value, in the future as it can purchase today. Inflation is the primary nemesis for the ability of money to store value. Example: If I buy a house now that the market is down planning on making money by selling the house when the market goes up.
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