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Chapter 3: Q.4 (page 110)

Suppose that the cost of a movie ticket is \(12, and a latte costs \)6. Why would the theater management say the cost of admission is $12 and not two lattes? Explain why it is more efficient to compare the value of commodities in monetary terms.

Short Answer

Expert verified

Money symbolizes units of cash in this example, and it serves as a standard measure of value that allows theatre management and moviegoers to compare the worth of services being supplied.

Step by step solution

01

Introduction

Using a monetary term reduces transaction costs by minimizing the number of items and services that both parties must examine. One of the money's primary responsibilities is to represent a unit of account.

02

Explanation 

A monetary product is an asset or debt with a fixed dollar value that will not fluctuate in the future. These things have a set monetary value, and a dollar is always worth money.

Money symbolizes units of cash in this example, and it serves as a standard measure of value that allows theatre management and moviegoers to compare the worth of services being supplied.

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Most popular questions from this chapter

Three goods are produced in an economy by three individuals: Good Producer Apples Orchard owner Bananas Banana grower Chocolate Chocolatier If the orchard owner likes only bananas, the banana grower likes only chocolate, and the chocolatier likes only apples, will any trade between these three persons take place in a barter economy? How will introducing money into the economy benefit these three producers?

Why is simply counting currency an inadequate measure of money?

The money supply is the entire amount of money in circulation, including cash, coins, and bank account balances. The money supply is typically defined as a collection of safe assets that consumers and companies can use to make payments or invest in short-term.

If you use an online payment system such as PayPal to purchase goods or services on the Internet, does this affect the M1 money supply, the M2 money supply, both, or neither? Explain

19. The table below shows hypothetical values, in billions of dollars, of different forms of money.

a. Use the table to calculate the M1 and M2 money supplies for each year, as well as the growth rates of the M1 and M2 money supplies from the previous year.

b. Why are the growth rates of M1 and M2 so different? Explain.


2019202020212022
Currency880895900906
Money market mutual fund shares680685683692
Saving account deposits5,5005,7805,9686,105
Money market deposit accounts1,2141,2451,2741,329
Demand and checkable deposits1,000972980993
Small denomination time deposits8408711,1331,576
Traveler's check5543
3-month treasury bills1,9862,3742,4362,502
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