What does it mean when money acts as a store of value quizlet?
Money serves as a store of value because it stores purchasing power over time and can be used for future purchases.
Money: The Ultimate Currency
Money has been the pillar of commerce for hundreds of years in many different forms. Whether it’s gold, paper bills or coins, money has been viewed as a representation of value. Today, when a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill serves as a:
Medium of Exchange
A medium of exchange is something that facilitates the trade of goods and services. This is how money is able to be used to pay for things. A $5 bill allows a person to exchange their goods for the money instead of having to find someone who needs what they are selling in exchange for goods or services.
Store of Value
Money is also a store of value, meaning it can be kept and exchanged again in the future. This ability to store value is one of the reasons it has been so successful as a currency system, since it can be kept and re-used. Since your $5 bill has a fixed, established value, it can be saved and then used later to purchase more goods and services.
Unit of Account
Money is also a unit of account – it provides a way to measure the value of goods and services. With the use of money, prices of goods and services can be expressed in a consistent, universal way. This helps establish an agreed upon value for everything, which makes economic transactions much simpler.
In summary, when a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill is a representation of value that functions as a:
- Medium of Exchange: allowing goods and services to be traded for money
- Store of Value: allowing value to be stored and exchanged in the future
- Unit of Account: providing a consistent way to measure the value of goods and services
We can thank money for making economic transactions so much simpler on a global scale. Although money takes many different forms, it serves as a reliable way to measure and exchange value no matter where we are.