Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 2 - The Market System and the Circular Flow - Questions: 5

Answer

The issue with barter is that it requires a series of wants to be in order; this means that if you want something the person you are attempting to get this product from must also want something from you. You then both have to agree that the product you want is worth the product they want. Money holds economic significance because it is a convenient invention that facilitates exchanges of goods and services quickly. The statement "We want money only to part with it" means that we work for money only to get rid of it when we see something else we need or want. We want money in the sense that it gets the goods and services we really want.

Work Step by Step

The example included uses Nebraskan wheat and Floridian oranges. If Nebraska wants oranges from Florida, but Florida does not want wheat from Nebraska then the trade will not occur. This barter will only occur if Florida wants wheat from Nebraska as well as Nebraska wanting oranges from Florida. Money is a convenience overall, without it we would be stuck in a barter system that would not guarantee us the goods/services we look for. Money makes the economy flow in a more efficient manner and saves consumers from trying to guess what the producer would trade for a product/service.
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