Respond to the following in a minimum of 175 words:
Identify the three functions of money. Provide an explanation of those functions using real world, actual examples (not hypothetical examples).
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Write My Essay For MeExplain what happens to the interest rate if the money supply increases or decreases and the money demand remains unchanged. Explain what happens to the interest rate if the money demand increases or decreases and the money supply remains unchanged.
SAMPLE SOLUTION
Identify the three functions of money. Provide an explanation of those functions using real-world, actual examples (not hypothetical examples)
Money has three main functions identified as: a medium of exchange, a unit of account, and store of value (Mishkin, 2007). As a medium of exchange, money is an aid to trade, facilitating the exchange of goods and services. An example is when a customer wants to purchase a car; he proceeds to a car dealer and exchanges money with the dealer according to the value of the car.
As a unit of account, money is used to value goods and services, keep records of creditors and debtors, and helps in making calculations. As a store of value, money is used to store the purchasing power of individuals to be used in the future. For example, one may keep money in his account…
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