Question

Sam has saved $30 per week to buy a new Blu-Ray player. He compares two different models: a Panaview that is priced at $130 and a Zony model that is priced at $140. Sam decides to purchase the Zony Blu-Ray player for $140. Identify what role money plays in each of the following parts of the story. Hint: Select each role only once. Role of Money Medium of Exchange Unit of Account Store of Value Sam can easily determine that the Panaview model has a lower price than the Zony model. Sam saved $30 per week. Sam pays $140 for the Blu-Ray player.

Answer 1

Answer:

Sam can easily determine that the Panaview model has a lower price than the Zony model. ⇒ UNIT OF ACCOUNT

Sam saved $30 per week. ⇒ STORE OF VALUE

Sam pays $140 for the Blu-Ray player. ⇒ MEDIUM OF EXCHANGE

Explanation:

The four main functions of money are:

1. it serves as a unit of account: it provides a common measure of the value of goods and services being exchanged.
2. it serves as a store of value: money holds its value over time, so it serves as a store of value.
3. it serves as a medium of exchange: you can use money to purchase goods and services
4. it serves as a standard of deferred payment: money serves as a way of valuing a debt, so you can acquire goods now and pay for them later.