EXPLAIN THE FUNCTIONS OF MONEY AND THE PROBLEMS OF BARTER THAT EACH...

1)

Explain the functions of money and the problems of barter that each overcomes.

Answer: Money is a medium of exchange, generally acceptable for payment for goods, services,

and debts. It reduces transactions costs relative to barter and eliminates the double

coincidence of wants. Money is a unit of account, reducing the transactions costs

associated with the multiplicity of barter prices. Money is a store of value. As a store of

value, money is more liquid than the many stores of value that might be used under barter.