Why is money as a medium of exchange important in an economy?
What will be an ideal response?
Money permits more specialization and reduces the transaction costs associated with means-of-payment uncertainty. Under barter, one might be uncertain as to what the other party might be willing to accept. With money, this uncertainty is greatly reduced.
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When demand is relatively inelastic, a 5% increase in price will:
a. increase total revenue by more than 5%. b. increase total revenue by less than 5%. c. decrease total revenue by more than 5%. d. decrease total revenue by more than 5%.
If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that
a. the poor family should pay more in taxes to pay for public education than the rich family. b. the rich family should pay more in taxes to pay for public education than the poor family. c. the benefits of private school exceed those of public school. d. public schools should be financed by property taxes.