Question

1. The roles of money Clancy wants to both purchase a new laptop and go Florida for spring break. The computer is priced at $1,299, and the vacation is priced at $800. He has only $1,574 in his checking account, so he cannot afford to purchase both. After much thought, Clancy buys the laptop and writes a check for $1,299. Identify what role money plays in each of the following parts of the story. Hint: Select each role only once. Role of Money Medium of Exchange Unit of Account Store of Value Clancy can easily determine that the price of the laptop is more than the price of the vacation. Clancy has $1,574 in his checking account. Clancy writes a check for $1,299.

Answer 1

1. Clancy can easily determine that the price of the laptop is more than the price of the vacation.

- Role of Money: Unit of Account

- Explanation: Money serves as a unit of account because Clancy is able to compare and measure the prices of different items (the laptop and the vacation) in terms of a common currency (dollars).

2. Clancy has $1,574 in his checking account.

- Role of Money: Store of Value

- Explanation: Money acts as a store of value because Clancy can keep his funds in his checking account, preserving their purchasing power until he decides to use them.

3. Clancy writes a check for $1,299.

- Role of Money: Medium of Exchange

- Explanation: Money functions as a medium of exchange as Clancy writes a check to purchase the laptop. The check represents the transfer of money from his account to the seller, enabling the transaction to take place.

In summary, money serves as a unit of account when comparing prices, a store of value when holding funds in an account, and a medium of exchange when transferring funds through a check.