Download the App!
Get 24/7 study help with the Numerade app for iOS and Android! Enter your email for an invite.
Question
Answered step-by-step
Which of the following are considered money in the U.S. economy? Which are not? Explain your answers by discussing each of the three functions of money.
a. a U.S. penny
b. a Mexican peso
c. a Picasso painting
d. a plastic credit card
Video Answer
Solved by verified expert
This problem has been solved!
Try Numerade free for 7 days
Like
Report
Official textbook answer
Video by Kaylee Mcclellan
Numerade Educator
This textbook answer is only visible when subscribed! Please subscribe to view the answer
02:26
Yi Chun Lin
No Related Courses
Chapter 29
The Monetary System
The Data of Macroeconomics
The Real Economy in the Long Run
Money and Prices in the Long Run
01:58
Which of the following are…
02:52
08:28
03:42
Money in the United States…
01:11
State whether each of the …
01:51
What "backs" the…
in this example we're taking a look at four examples of items that could be interpreted as money within the U. S. Economy. And we want to discuss whether or not they actually are and to do that, we should first recall the three functions of money. The first of which is that money is a medium of exchange. So that means that we can use it in order to purchase something else right? It's that trading value that we have that allows us to purchase other goods with it. The second function of money is that it's a store of value, meaning that it actually has value. Were able to measure the value of something with this amount of money. So that amount of dollars or sense within this U. S. Economy would tell us the value of something. And the third function of money is that it's a unit of account. Yeah. Now being a unit of account just means that we are able to record values with it. It remains standard across values of money within the US. economy. So we can say that something is $2 and then another item is $4 and we know that one is twice as expensive as the other. So let's go through these four examples starting with a right here a penny. And we'd like to know if this is money within the U. S. Economy. Well thinking about a penny, we know that it's a medium of exchange. We can use it to purchase things. It's a store of value because it's one cent. We can say that that is worth something and it's a unit of account because we're able to measure the worth of something else using it. So we can say that a penny is in fact um money within the U. S. Economy. Now taking a look at B. Which is a pay. So this would be money in the mexican economy. However in the United States we don't use the mexican peso as a medium of exchange or unit of account. It could be a store of value but it doesn't pass that test of being a medium of exchange or unit of account. So peso is not money within the U. S. Economy. See a Picasso painting is also not going to be considered money within the U. S. Economy. And that's because it can't be used as a medium of exchange or unit of account. And it could be a store of value definitely. But we can't use a Picasso painting to purchase something else. And d we have a credit card. And this is also not money within the U. S. Economy because it's really just an instrument that we use when it comes to purchasing things and when it comes to types of borrowing but it really doesn't act as a medium of exchange or store of value.
View More Answers From This Book
Find Another Textbook
