Question

Imagine you own a lawn-mowing business. Identify the main function of money exhibited in each situation below.

a. You swipe your debit card to purchase gasoline for your lawn mower: _______ (Medium of exchange, unit of account, store of value)
b. You stuff your earnings from mowing lawns into a piggy bank: _______ (Medium of exchange, unit of account, store of value)
c. You pay your friend Cornelius $5 to help you mow lawns: ______(Medium of exchange, unit of account, store of value)
d. You calculate your net earnings for the year on your tax return: ______ (Medium of exchange, unit of account, store of value)
e. You determine how much value your new lawn mower has added to your business: _____________ (Medium of exchange, unit of account, store of value)

Answer 1

A.) Medium of exchange - Here money is used for doing transaction and therefore, this example is under the medium of exchange.

B.) Store of value - Here, a person store or deposits his money into a bank and therefore, this shows the store of value characteristic of money.

C.) Medium of exchange - Here, one of my friend utilize money for helping me mowing lawns which shows that money is used as a medium of exchange.

D.) Unit of account - The unit of account characteristic of money is reflected here because a person easily calculated his net earnings for the year on the tax return in terms of money.

E.) Unit of account - The unit of account characteristic of money is reflected here because a person easily calculated his new lawn mower value.