Ch. 10: Money and Banking. Sec. 1: Money: Its Function and Properties. Functions of Money. Money – is anything that people will accept as payment for goods and services -must perform 3 functions. Function 1: Medium of Exchange.
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Money – is anything that people will accept as payment for goods and services -must perform 3 functions
-to perform 3 functions – an item must possess certain physical & economic properties
Without central bank –
States banks returned to old practices – own currency with no link to gold or silver
-economy still experienced periods of inflation and recession and financial panics
-due to lack of a central decision making institution to manage money supply in a flexible way to adapt to changes
Banks act like money stores –
Customers able to do 3 things:
Banks are businesses that earn money by charging interest or fees on these services