Question
What are the three economic uses of money?
What are some key characteristics of "good money"? (4 points)
What are some key characteristics of "good money"? (4 points)
Answers
GPT-4o mini
The three economic uses of money are:
1. **Medium of Exchange**: Money facilitates transactions by serving as an intermediary in the exchange of goods and services, reducing the need for barter and simplifying trade.
2. **Unit of Account**: Money provides a standard measure of value, allowing individuals and businesses to compare the value of different goods and services, set prices, and keep financial records.
3. **Store of Value**: Money can maintain its value over time, allowing individuals to save and preserve wealth for future use. This characteristic allows people to defer consumption until a later date without losing value.
### Key Characteristics of "Good Money"
1. **Durability**: Good money must be able to withstand physical wear and tear, ensuring it remains usable over time.
2. **Portability**: Money should be easy to carry and transfer, enabling transactions to occur with convenience and efficiency.
3. **Divisibility**: Good money should be easily divisible into smaller units to allow for transactions of varying sizes, ensuring that it can be used for both large and small purchases.
4. **Uniformity**: Each unit of money should be the same in terms of value and appearance, making it easily recognizable and reducing ambiguity in transactions.
1. **Medium of Exchange**: Money facilitates transactions by serving as an intermediary in the exchange of goods and services, reducing the need for barter and simplifying trade.
2. **Unit of Account**: Money provides a standard measure of value, allowing individuals and businesses to compare the value of different goods and services, set prices, and keep financial records.
3. **Store of Value**: Money can maintain its value over time, allowing individuals to save and preserve wealth for future use. This characteristic allows people to defer consumption until a later date without losing value.
### Key Characteristics of "Good Money"
1. **Durability**: Good money must be able to withstand physical wear and tear, ensuring it remains usable over time.
2. **Portability**: Money should be easy to carry and transfer, enabling transactions to occur with convenience and efficiency.
3. **Divisibility**: Good money should be easily divisible into smaller units to allow for transactions of varying sizes, ensuring that it can be used for both large and small purchases.
4. **Uniformity**: Each unit of money should be the same in terms of value and appearance, making it easily recognizable and reducing ambiguity in transactions.