Macroeconomics: Principles for a Changing World
Macroeconomics: Principles for a Changing World
4th Edition
ISBN: 9781464186929
Author: Eric Chiang
Publisher: Worth Publishers
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Chapter 11, Problem 1QP
To determine

The three functions of money.

Expert Solution & Answer
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Explanation of Solution

Money is an asset that is widely accepted as a means of payment. The main functions of money are listed below:

  • Medium of exchange: Money acts as a medium of exchange to pay for the goods and service.
  • Unit of account: As a unit of account, money is used to measure the value of goods and services in the economy.
  • Store of value: Money has the store of value. This function facilitates the exchange of goods and services over time.

Thus, the three main functions of money are medium of exchange, unit of account, and store of value.

Economics Concept Introduction

Money: Money refers to the medium of exchange in a form of paper currency and coins, which are used to make payment for all the commodities and services.

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Wolfgang is a typical producer in a perfectly competitive piano industry (i.e., all other producers of pianos face the same costs as Wolfgang). The following production and cost data apply to the long run as well as the short run. Fixed costs (rent) are unrecoverable in the short run and are equal to $2400 per month. Variable costs consist of raw materials (wire, wood, plastic), which cost $1000 per piano, and the $40 per hour opportunity cost of Wolfgang's time. Wolfgang's production function is given in the table at right. Wolfgang will shut down if the price per piano is less than OA. $3000. B. $4000. O C. $5000. ○ D. None of the above. Pianos (Q) Hours (L) Raw Materials ( 0 0 0 1 100 1000 2 150 2000 3 240 3000 4 400 4000
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