The Medium of Exchange Function of Money Allows an Economy

question 257

Multiple Choice

The medium of exchange function of money allows an economy to avoid the problem of

• A) lack of a double coincidence of wants.
• B) unemployment.
• C) loss of purchasing power during a period of high inflation.
• D) rising interest rates.

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Definitions:

Requirements Contract

An agreement in which one party agrees to purchase all of his or her requirements of a particular product from another party. See also output contract.

Output Contract

An agreement in which a seller agrees to sell “all the goods we manufacture” or “all the crops we produce” to a particular buyer. See also requirements contract.

Valid Contract

A contract that is legally binding and fully enforceable by the court.

Future Goods

Goods that are not yet in existence or under the control of people; they include fish in the sea, minerals in the ground, goods not yet manufactured, and commodities futures.