Awesome Marks! Money

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Try to imagine an economy without money. Without money, it would be almost impossible to carry out the usual day to day business of life. For instance, if you wanted to buy a hamburger without cash, you would have to give the restaurant something else in return. Perhaps you could wash the dishes, or sweep the floor. Either way, the ability to pay for goods and services with money greatly simplifies consumer life and eliminates the necessity of bartering goods and services for other goods and services. What exactly does money do? Sure, you can buy things with it and save it, but how does it function within the economy? There are four basic functions of money: The first is as a medium of exchange. The second is as a unit of account. The third is as a store of value. The fourth is as liquidity. By understanding each of these functions, it is possible to see how important money is to the economy. The most obvious function of money is as a medium of exchange. When you hand the waiter a five-dollar bill in exchange for your hamburger, you are using money as a medium of exchange. You might have a hard time paying for your hamburger with five dollars worth of apples, but if you did, the apples would serve as a medium of exchange as well. To simplify, a medium of exchange is something that buyers give to sellers in exchange for goods and services. Perhaps money's most compelling advantage is that it is a commonly recognized and universally accepted medium of exchange. This allows anyone with money to walk into any restaurant with the confidence that the waiter or clerk will take your cash in exchange for goods or services. This would likely not be the case with a basket full of apples. The second function of money, as a unit of account, is rather obvious, but you may never have considered it before. When you walk into a restaurant, the menu tells you that a

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