37. What messages do price increases and decreases send to producers of goods and services?

In economics, the term «price» denotes the consideration in cash for the transfer of something valuable, such as goods, services, currencies, securities, etc.

Prices perform two important economic functions: they ration scarce resources, and they motivate production. As a general rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it.

Price increases and decreases also send messages to suppliers and potential suppliers of goods and services. As prices rise, the increase serves to attract additional producers. Similarly, price decreases drive producers out of the market. In this way prices encourage producers to increase or decrease their level of output. Economists refer to this as the production-motivating function of prices.

Prices may be either free to respond to changes in supply and demand or controlled by the government or some other (usually large) organization.

38. What is money?

Basically, money is what money does. This means that money can be any substance that functions as a Medium of Exchange, a Measure of Value, and a Store of Value.

As a medium of exchange, money is something generally accepted as payment for goods and services

As a measure of value, money expresses worth in terms that most individuals understand.

Money also serves as a store of value. This means goods or services can be converted into money that is easily stored until some future time.

The different forms of money are in use in the world today. The most familiar are coin and currency. The term coin refers to metallic forms of money. The term currency refers to paper money issued by government. Modern money is very portable when people carry checkbooks. For example, they really are carrying very large sums of money since checks can be written in almost any amount.

39. What forms of money are in use in the world today?

Basically, money is what money does. This means that money can be any substance that functions as a Medium of Exchange, a Measure of Value, and a Store of Value.

The different forms of money are in use in the world today.

The most familiar are:

• Coins and banknotes / paper money;

• As a balance with a bank;

• Electronic money.

The most common forms of money you can touch and hold as a physical object are coins and banknotes (paper money).

In addition to money you can physically touch and hold, money can also exist in the form of a balance at the bank. In many cases this is a savings account, but nowadays, it can also be a debit account.

Because the whole process of transferring money takes so little time nowadays, it feels as if the bank card has turned into a form of money. That's why people refer to the bank card as 'electronic money'. Another form of electronic money is a credit card.

40. What does the term currency refer to?

In economics, the term currency can refer to a particular currency, for example Pound Sterling, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. Typically currency refers to money that is legally designated as such by the governing body.

Currency is any form of money that is in public circulation. Currency includes both hard money (coins) and soft money (paper money).

Historically, money in the form of currency has predominated. Usually (gold or silver) coins of intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By contrast, modern currency, as fiat money, is intrinsically worthless.

In most cases, each private central bank has monopoly control over the supply and production of its own currency.

Each currency typically has a main currency unit (the U.S. dollar, for example, or the euro).