Assesment 3 Coursework Example | Topics and Well Written Essays - 750 words - 1

Assesment 3 - Coursework Example Hence the informal sector is often excluded. The question can’t be answered unambiguously. Whenever the some goods or services are produced that implies the generation of income and wealth in one hand and on the other hand the producer has to pay the factors. So the cost-benefit analysis will finally let us know whether the wealth is depleted or not. Money is the most accepted medium of exchange. This is the primary and unique function of money. Money, as a medium of exchange, has facilitated the transactions greatly. At the absence of money there would be direct barter of goods and services. There are many difficulties. For example a transaction requires a double coincidence of wants. To find out such situation it requires time and transaction cost. But if there is a common medium of exchange any body would convert his good or service into the medium and later on purchase his required commodity by that. Moreover there are some goods which are indivisible into small units. That difficulty can be recovered by converting into money which is divisible. Money customarily serves as a measure of value or unit of account to express the values of good or services. It is used as a measuring scale. In such a way the absolute prices of each goods are measured. Once the absolute price of each commodity is obtained the relative price of one commodity in terms of other can be easily measured. Otherwise in the absence of money, in a n commodity space we have to remember n!/2!*(n-2)! Number of relative prices. So the usage of money eases the calculation of absolute and relative prices. Due to the capacity of money to act as a medium of exchange and measure of value, money is commonly used as a standard of deferred payment. This applies to payments of interest, rent, salaries, pensions etc. In terms of money these payments are settled. Large fluctuations in the value of money (due to inflation or deflation) weaken the base of