3 Functions of Money

The video tutorial explains the concept of money, highlighting its three main functions: medium of exchange, unit of account, and store of value. It illustrates these functions with examples, such as Clifford dollars used in a classroom setting. The tutorial also differentiates between fiat money, which has no intrinsic value, and commodity money, which does. It concludes by discussing the decline of the gold standard and the prevalence of fiat money today.

What is the primary function of money as described in the first section?

• To be a unit of account

• To be a medium of exchange

• To store value

• To be a form of entertainment

How does money function as a unit of account?

• By being a form of investment

• By being accepted for payments

• By storing value over time

• By measuring the relative value of goods and services

What happens to the store of value function of money during inflation?

• It increases

• It becomes irrelevant

• It remains unchanged

• It diminishes

What is a key difference between fiat money and commodity money?

• Fiat money is backed by gold

• Commodity money has no intrinsic value

• Fiat money has intrinsic value

• Commodity money has intrinsic value

Why is fiat money more commonly used than commodity money today?

• Because it has intrinsic value

• Because no country uses the gold standard anymore

• Because it is easier to produce

• Because it is backed by gold