Unit 1: Functions of money

• What are the functions of money?


  Medium of exchange, measure of value, form of defferred payment, and store of value.
• How does money act as a medium of exchange?

  Without money, people would have to barter. Bartering might not work if one of the people don't want what the other has. Money solves the batering issue.
• How does money act as a measure of value?

  Money gives value to goods. Allows customers and producers to make agreeable decisions.
• How does money act as a store of value?

  Money holds value over long periods of time.
• How does money act as a method of deferred payment?


  Allows customers to make a purchase in the present (arrange terms of credit) and pay for it later (settle debts)
• What is inflation?


  Increase in the price level of goods and services in an economy over a period of time.
• How does inflation affect money's aspect to store value?

  Inflation reduces money's ability to hold value
• What type of inflation affects money's ability to act as a form of deferred payment ?

  Unanticipated inflation affects this aspect.
• What type of inflation affects money ability to function at all?

  Hyperinflation
• Hyperinflation


  when the prices of goods and services rise more than 50% per month