The first major function of money is that it serves as an exchange medium. The second major function of money is that it acts as a value store. The other function of money is that it serves as a value measurement or unit of accounts. The…
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The best example of barter system is that suppose there are two persons, one of them has a goat and the other has a cow and they both want the goods possessed by each other. In such condition the barter system is created so as to get into an agreement for the procedure of goods exchange. However even if the goods are exchanged successfully there would be a time when the goat and cow would die and hence it can be stated that these goods are not able to maintain their initial value over the time. In such a scenario there was evolution of a new concept in the form of money which served as exchange medium (Schwartz 361).This medium was accepted widely by all the traders as it was able to solve the problem that was associated with goods that deteriorated with time.
One of the most important functions of money is that it can be considered to be unit of account that facilitates a mechanism through which value can be placed on the services and goods. This is simply because such a function is a standard unit in monetary terms for value measurement on services and goods. For instance when a person goes to a supermarket the monetary value of goods can be observed by the person through the price tags on the goods. There even exists monetary value on services such as when a person goes for a spa and gets the required service the person in return pays money to the concerned individual for the availed service. Thus unit of account as a function of money can be regarded as value measurement for services and goods.
The supply of money can be considered as liquid instrument and total stock assets at a particular time and this in turn in an economy of a country is accepted as medium of exchange. The Federal Reserve System takes into control the supply of money in America. The supply of money comprises of three essential components such as the
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Either banking system deals with assets and borrowers from a location other than the institutional head quarter of the bank. More phenomenally, the difference is identified between the fund raising and distribution stream of both of them while they deal with foreign deposits and borrowings.
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2. According to the author, the “ones who walk
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