What Primary Function Is Money Serving When It Is Used to Buy a Ticket to a Movie?

In economics, standard of deferred payment is a role of money. Information technology is the office of being a widely accepted way to value a debt, thereby allowing goods and services to be acquired now and paid for in the future.^[1]

The 19th-century economist William Stanley Jevons, influential in the study of coin, considered information technology to be i of four cardinal functions of money. The other three being medium of commutation, store of value, and unit of account. Nonetheless, most modern textbooks now list only the other three functions; considering standard of deferred payment to be subsumed by the others.^{[ii] [three] [4]}

Most forms of money can act as standards of deferred payment including commodity coin, representative money and most normally fiat money. Representative and fiat money often exist in digital form as well equally physical tokens such equally coins and notes.

Functions of money [edit]

Coin is held to serve multiple distinguished but related functions, of which a "standard of deferred payment" is one.^{[v] [half dozen] [7] [8] [9]} The most usually distinguished functions of money are every bit a medium of exchange, a unit of business relationship, a store of value, and, sometimes, a standard of deferred payment, summarized in a mnemonic rhyme of older economics texts:

"Money is a matter of functions 4: a medium, a measure, a standard and a store."

However, many newer texts do non distinguish the office of a standard of deferred payment, subsuming it in other functions.^{[2] [3] [four]}

Being a standard of deferred payment is one of the functions of money; it is distinct from:

• The standard of deferred payment can be distinguished from the medium of exchange function because of how its value might modify over fourth dimension. If payment is to be deferred, information technology should be denominated in a unit which is expected to maintain its value. Deferred payments require durability when used in merchandise, and a minimum of opportunity to cheat others — as the diamond or gilded examples illustrate.^{[ citation needed ]}
• the store of value part, which relates to the saving, storing, and retrieval of value; and
• the unit of measurement of account part which requires fungibility and then accounts in whatsoever amount can be readily settled.^{[ citation needed ]}

When currency is stable, money can serve all four functions. When information technology is non, or when complex and volatile forms of financial upper-case letter are involved, some may wish to place a single standard of deferred payment to avoid strategic behavior. Otherwise, for instance, a debtor might try to select a standard of deferred payment of debt that is forecast to driblet in value then the real value of his payment to the lender will be lower. The lender can avoid this by selecting a denomination of debt that is forecast to maintain its value.^{[ commendation needed ]}

Relation to debt [edit]

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A debt is a deferred payment; a standard of deferred payment is what they are denominated in. Since the value of money – be it dollars, aureate, or others – may fluctuate over time via inflation and deflation, the value of deferred payments (the existent level of debt) likewise fluctuates. A device is termed "legal tender" if it may serve to discharge (pay off) debts; thus, while US dollars are not backed by gold or whatsoever other commodity, they depict value from being legal tender – being usable to pay off debts.

Examples [edit]

Deferred payment is based on enforceability of debts and rule of law, and is not used or rarely used when debts are unlikely to exist collectable. For certain kinds of transactions (such every bit for illegal goods similar drugs or weapons), gold or diamonds may be preferred as the medium of exchange — there being no recourse in instance of counterfeit currency existence used — and in that location is rarely any deferral of payment: if there is, it will well-nigh likely be stated in dollars.^{[ commendation needed ]}

Historically, there have been many times when creditors accept had to hide from debtors to avert existence paid off in near worthless currency, typically post-obit hyper-aggrandizement.^{[ citation needed ]}

Time-based currency such as Ithaca Hours establishes fixed amounts of human labour as the only standard of deferred payment.^{[ citation needed ]}

See also [edit]

• Bretton Wood system
• Credit
• Legal tender
• Value of life

References [edit]

1. ^ "AmosWEB is Economics: Encyclonomic WEB*pedia".
2. ^ ^{a b} Mankiw, Northward. Gregory (2007). "2". Macroeconomics (sixth ed.). New York: Worth Publishers. pp. 22–32. ISBN978-0-7167-6213-iii.
3. ^ ^{a b} Krugman, Paul & Wells, Robin, Economics, Worth Publishers, New York (2006)
4. ^ ^{a b} Abel, Andrew; Bernanke, Ben (2005). "vii". Macroeconomics (fifth ed.). Pearson. pp. 266–269. ISBN0-201-32789-9.
5. ^ T.H. Greco. Money: Agreement and Creating Alternatives to Legal Tender, White River Junction, Vt: Chelsea Greenish Publishing (2001). ISBN 1-890132-37-iii
6. ^ An introduction to money and cyberbanking, by Colin Dearborn Campbell, 1978, p. 23
7. ^ Money and the economy, by John J. Klein, p. 5
8. ^ Applied economic science in banking and finance, by H. Carter, Ian Partington, p. 26
9. ^ Money, Banking, and Budgetary Policy, past Colin Dearborn Campbell, Rosemary Thousand. Campbell, Edwin Thousand. Dolan, 1987, p. 38–twoscore

Notes [edit]

• The value of money, by Benjamin McAlester Anderson, 1917, p. 436
• Economics, by Jerome F Burns, Robert Burton Ekelund, Robert D. Tollison, p. 656

  Contains examination questions asked by the Board of Regents of the Land of New York, 1929-1937.

• The cause of business organisation depressions, by Hugo Bilgram, Louis Edward Levy, 1914, p. 93

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Source: https://en.wikipedia.org/wiki/Standard_of_deferred_payment

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