Question

Lorenzo wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $1,299, and the vacation is priced at $800. He has only $1,574 in his checking account, so he cannot afford to purchase both. After much thought, Lorenzo buys the computer and writes a check for $1,299. Identify what role money plays in each of the following parts of the story.

Answer 1

Answer:

First part of the story: Unit of Account.

Second part of the story: Store of value.

Third part of the story: Medium of exchange.

Explanation:

In the first part of the story where Lorenzo knows the prices of the computer and vacation, money has played the role for Unit Of Account.

Unit of account is a function of money, in which the value of something is measured in a particular currency and allows one thing to be compared against another. Like comparing the value of the computer to the value of the vacation.

In the second part of the story where Lorenzo has $1,574 in his checking account, money has played the role of a store of value.

Store of value is the attribute of an asset that can make it to be saved, retrieved, and exchanged at a later date and which the saving of the asset will not diminish its usefulness when it is retrieved. In the case of Lorenzo, the money in his checking account is a store of value.

In the third part of the story, money has played the role of a medium of exchange, because he has written a check for $1,299 in exchange for a computer.

Answer 2

Answer:

Please see explanation below

Explanation:

Money is a limited resources. In this case since the money couldn't get him both of the request, it has allowed him to choose his most pressing needs.