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AD-AS MODEL: An economic model relating the price level and real production that is used to analyze business cycles, gross domestic product, unemployment, inflation, stabilization policies, and related macroeconomic phenomena. The AS-AD model, inspired by the standard market model, captures the interaction between aggregate demand (the buyers) and short-run and long-run aggregate supply (the sellers).
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                           VALUE IN EXCHANGE: The ability to trade an item or asset, especially money, for other goods and services that can then be used to satisfy wants and needs. Value in exchange means that value (that is, satisfaction) is obtained indirectly through the acquisition of something else. For an item to have value in exchange it need NOT have value in use, value obtained directly from the consumption of a good or service. The notion of value in exchange is most important for money. In particular, almost all modern money is fiat money, which has value in exchange, but little or no value in use. In contrast, commodity money has value in exchange and value in use. Value in exchange goes hand-in-hand with the medium of exchange function of money. When an item is generally accepted in payment for goods and services and thus serves the medium of exchange function, then it HAS value in exchange. People are willing to accept money in exchange for the goods they HAVE because they know that this money can then be exchanged for other goods that they WANT.The value in exchange of commodity money is largely based on the commodity's value in use. In fact, the earliest forms of money were commodities that provided value in use to virtually everyone in an economy, such as grains for food and animal skins for clothing. For example, in the early eons of civiliaation, people were willing to accept bushels of grain in trade for another good because they were hungry, because the grain had value in use, NOT necessarily because they planned to use the grain to buy another good, NOT because the grain had value in exchange. However, knowing that EVERYONE was willing to trade for grain gave it value in exchange. Because people couldd trade the grain to others, they were willing to accept grain in payment even when they were NOT hungry, even when the grain. did not provide them with value in use. The value in exchange of fiat money is based exclusively on an item's widespread acceptance AS MONEY. In the modern world, people accept fiat money in payment because EVERYONE accepts fiat money in payment. Continued acceptance of fiat money rests largely with the authority responsible for issuing the money, usually government. If the issuing government remains healthy, trustworthy, and responsible, then the money that it issues continues to be accepted as payment. A primary way that government maintains the "official" status of money is to accept it in payment for taxes. Usually, not always, but usually, whatever item the government is willing to accept as payment is good enough for the rest of the economy. Such acceptance gives the item value in exchange. Some folks overlook the point that money ONLY requires value in exchange to function effectively as the medium of exchange. Money does NOT require value in use. Value in use definitely played a key role in the historical progression from barter to fiat money. Commodities with economy-wide value in use that evolved into commodity money revealed the benefits of money over barter. But those who study money now know that the benefits associated with value in exchange are distinct from value in use. Money is only valuable NOT for what it IS, but for what it can BUY.
 Recommended Citation:VALUE IN EXCHANGE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: March 20, 2025]. Check Out These Related Terms... | | | | | | | | Or For A Little Background... | | | | | | | | | | | And For Further Study... | | | | | | | | | | | | Related Websites (Will Open in New Window)... | | | |
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
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"Look at the abundance all around you as you go about your daily business. You have as much right to this abundance as any other living creature. It's yours for the asking." -- Earl Nightingale
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G10 Group of Ten
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