The roles of money Consider the following scenario: Kim wants to purchase a new

Question

The roles of money Consider the following scenario: Kim wants to purchase a new computer and go to the Caribbean for spring break. The computer is priced at $899, and the vacation is priced at $650. She has only $1,100 in her checking account, so she cannot afford to purchase both. After much thought, Kim buys the computer and writes a check for $899. Identify what role money plays in each of the following parts of the story. Role of Money Medium of Exchange Unit of Account Store of Value Kim can easily determine that the price of the computer is more than the price of the vacation. Kim has $1,100 in her checking account. Kim writes a check for $899.

Explanation / Answer

(1) Kim can determine price of computer - Money as unit of account (which makes price comparison possible)

(2) Kim has $1100 in checking account - Money as store of value

(3) Kim writes a check for $899 - Money as medium of exchange

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