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Economics Homework One - Model (view source)
Revision as of 18:43, September 13, 2009
, 18:43, September 13, 2009added essay
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Essay on student's initiative: "What is money really?"
In class, an interesting question was asked; is money a service or good? Or maybe a category entirely its own? I was so intrigued by this that I decided to do some research on the subject, and see what money really is.
First, a working definition of money is required. Money is a measure of worth, a means of exchange, which need not have any intrinsic value of its own; a legally established exchangeable equivalent for all other commodities. It can be backed by a gold or silver standard, but does not have to be; in the U.S., we have a “fiat” currency, which is any money not backed by gold or silver, and not necessarily redeemable in coin.
So money is obviously not a service. It isn’t an action, or entertainment, etc. However, it often shows work, thought, performance, and effort, all of which are types of services. A dollar symbolizes a percentage of your day, a portion of energy and exertion, and other various services. Therefore, while money is not actually a service, it represents them.
But what of the question of whether or not money is a good. It certainly isn’t free, so it is scarce. Work must be done to obtain it, services or goods provided in exchange. Apart from the value ascribed to is by the foreign exchange market, it is worthless. Money has no value of its own, no importance or desirability other than the goods or services someone would give you in exchange for it. So its value is not in use, but in exchange, like a precious metal or stone.
The conclusion I reached is that while money is not a service, it represents those things, like a ticket to a concert, or sports game. And it is a good, because although it has no value in use, money has value in exchange. So in a way, money is in a category of its own, because it has value as both a service and a good. (Michelle)