Question

Manuel 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 $750. He has only $1,537 in his checking account, so he cannot afford to purchase both. After much thought, Manuel buys the computer and writes a check for $1,299. 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 Manuel can easily determine that the price of the computer is more than the price of the vacation. Manuel has $1,537 in his checking account. Manuel writes a check for $1,299.

Answer 1

Answer: See explanation

Explanation:

a. The computer is priced at $1,299, and the vacation is priced at $750.

This is a unit of account as Manuel can measure and compare the prices of the two goods.

b. Manuel has only $1,537 in his checking account.

This is store of value. This means that money can be saved by an economic agent and later retrieved in the future when the person needs it.

c. Manuel writes a check for $1,299.

This is a medium exchange. Manuel buying the computer and writing a check for $1,299 shows that money can be used in exchange for goods and to pay for transactions.