Question

Nick has saved $30 per week to buy a new Blu-ray player. He compares two different models: a Panaview that is priced at $130 and a Zony model that is priced at $140. Nick decides to purchase the Zony Blu-ray player for $140.

Identify what role money plays in each of the following parts of the story.
1. Nick can easily determine that the Panaview model has a lower price than the Zony model.
2. Nick saved $30 per week.
3. Nick pays $140 for the Blu-Ray player.

Answer 1

1. Nick can easily determine that the Panaview model has a lower price than the Zony model. - Unit of Account.

One of the three roles money plays is that of Unit of Account. Money is used to measure the values of goods and services accurately, so that their values can be assessed, and more importantly, compared.

2. Nick saved $30 per week. - Store of Value.

Another one of the three roles of money is that of Store of Value. Money is a good that has intrinsic value, and can be amassed to save for the future.

3. Nick pays $140 for the Blu-Ray player. - Medium of Exchange.

The final role that money plays is that of Medium of Exchange. Money is a good that can be used to facilitate exchange among other goods and services because it can be easily stored, it works as a unit of account, it is accepted by many people, and it has some sort of official authority backing it.