ECON 2035 Chapter : 2035 1 21
Document Summary
= anything that is accepted as payment for g&s or debt repayment. Commodity money = good used as money that also has value independent of its use as money ex: gold. Anything used as money for barter (deerskin, seashell, cigarettes or dollar) should fulfill four functions: Medium of exchange, unit of value, store of value, standard or deferred payment. Double coincidence of wants = not being able to barter originally because no one wants your cotton. Need to find a place to hold/store clunky mass of cotton until then. Need to know values of many different items, in order to barter well. Number of prices to know [n(n-1)] / 2 footnote 3 in textbook. Eliminates trouble of double coincidence of wants (reduces transaction costs), promotes specialization. Must be easily standardized, widely accepted, divisible, easy to carry, not deteriorate quickly (cotton fiber in linen) Unit of account is used to measure value in the economy, reduces transaction costs.
