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LOAN: In general, a transaction in which a legal claim is exchanged for money. The legal claim is typically a contract or promissory note stipulating when and how the money will be repaid. The lender gives up the money and receives the legal claim. The borrower gives up the legal claim and receives the money. A loan can be either an asset or a liability, depending on who does the borrowing and who does the lending. To the borrower, a loan is a liability, something that is owed. The borrower must pay off the loan or repurchase the legal claim. However, to the lender, a loan is an asset, something that is owned. In fact, loans represent a significant part of a bank's assets.
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Lesson 17: Money | Unit 2: More About Money
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Page: 5 of 25
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Topic:
Medium of Exchange
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The primary function of money is to as THE medium of exchange. An economy without money: - Barter exchange happens when you trade one good for another.
- A barter economy is one that uses nothing but barter trades, no money.
- Barter requires double coincidence of wants: I must want what you have and you must want what I have.
- With no money, resources are used for trading and not for production.
The bottom line: - Using money as a medium of exchange eases the exchange process, makes it more efficient, and frees resources for production.
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MEDIUM OF EXCHANGE The money function in which money is widely accept in exchange for goods and services. For an asset to function as a medium of exchange it needs value in exchange, but not necessarily value in use. This is one of four basic functions of money. The other three are unit of account, store of value, and standard of deferred payment.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time browsing about a thrift store looking to buy either a small palm tree that will fit on your coffee table or several magazines on fashion design. Be on the lookout for crowded shopping malls.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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"We should never allow ourselves to be bullied by an either-or. There is often the possibility of something better than either of those two alternatives. " -- Mary Parker Follett, management coach
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JLEO
Journal of Law, Economics and Organization
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