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When people describe how much a product is worth, which function of money are they using?

User Dicroce
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Final answer:

People are using money as a unit of account when describing the worth of a product, which simplifies trade by providing a common measure of value and streamlining commerce beyond the inefficiencies of a barter system.

Step-by-step explanation:

When people describe how much a product is worth, they are using money as a unit of account. This function of money allows it to act as a common denominator and an accounting method that simplifies thinking about trade-offs. For instance, if an accountant charges $100 to file a tax return, that same amount can equate to buying two pairs of shoes at $50 each. The value of goods and services is measured against this monetary baseline, enabling comparability and uniformity in pricing.

Without such a unit of account, trade and commerce would likely regress to a barter system with a much more complex and inefficient process, where a double coincidence of wants is needed. Money, in its role as a measure of value, streamlines this process immensely, allowing for a stable and functional economy.

User Jonathan Ellis
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