Money, Money, Money!
Circular Flow Diagram! Functions of Money! Keywords!
Circular Flow Diagram
The circular flow diagram is a model showing the basic economic relationships within a market economy. It illustrates how money, resources, and goods/service flow from businesses, households, and resource/product markets.
Functions of Money
Money has three functions:
~ store of value| tradable and can be stored for future use
~ measure of value|common benchmark to decide the prices of goods
~ medium of exchange|widely accepted in exchange for goods and services.
Examples:
Store of Value
When you put money in a safe, it will still be worth its original amount.
Measure of Value
Money gives everything a price or value.
Medium of Exchange
Money is accept as payment for anything.
Additional Information:
~ voluntary exchange|free exchange of goods and services between buyers and seller in some sort of marketplace
~ barter|exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange
~market|regular gathering of people for the purchase and sale of provisions, livestock, and other commodities