The money function in which money i

The money function in which money is used as a standard benchmark for specifying future payments for current purchases, that is, buying now and paying later. This function may seem obscure, but it is a direct result of the store of value and unit of account functions. This is one of four basic functions of money. The other three are medium of exchange, unit of account, and store of value.
Using money as a standard of deferred payments is a direct consequence of the unit of account and store of value functions of money. If money is the standard for current prices, then money is also the standard for future payments based on these prices. But, for money to function as a DEFERRED payment standard, it must retain value, it must also store value.
Buy Now, Pay Later
While many market transactions are almost instantaneous, a good is exchanged for money at approximately the same time. When Duncan Thurly buys a hot fudge sundae, he hands the ice cream vendor two, slightly wrinkled one-dollar bills as the vendor hands him a freshly prepared hot fudge sundae. The good goes from seller to buyer as the money goes from buyer to seller.
However, a number of transactions involve deferred payments--buy now, pay later. The good goes from seller to buyer today, but the money goes from buyer to seller tomorrow.

A common example of a deferred payment is that associated with buying a car, especially paying off a car loan. Duncan can get a loan to buy a car today, then pay off the loan with payments deferred into the future. In the same way that an immediate payment is stated in terms of the monetary unit, so too is any deferred payment.

For example, Duncan can buy a $10,000 car by making one immediate payment of $10,000, or one or more deferred payments that total (at least) $10,000. Whether immediate or deferred, the payments are based on the price of the car, which is stated in the monetary unit of dollars.

Inflation and Interest
Deferred payments depend in part on price and the unit of account function of money, and in part on how well money stores value. This means that deferred payments depend on interest rates and inflation. In the preceding car-buying example, Duncan Thurly is unlikely to purchase a car with deferred payments that total ONLY $10,000.
Suppose, for example, that Duncan plans to make one deferred payment a year after purchasing his $10,000 car. If the going interest rate is 10 percent, then Duncan's deferred payment is something like $11,000. The extra $1,000 (10 percent of the $10,000 price) is needed to compensate the seller for the interest lost when waiting a year to get paid.

This 10 percent interest adjustment of the deferred payment is also dependent on inflation. A positive inflation rate (anything greater than zero) means that the interest rate is greater than 10 percent. That is, the seller also needs to be compensated for the loss of value resulting from higher prices. Alternatively, a negative inflation rate (anything less than zero) means that the interest rate is less than 10 percent.

A 5 percent annual inflation rate means that the deferred payment for this $10,000 car is approximately $11,500. This amount is the combination of the $10,000 purchase price, the $1,000 interest, and an extra $500 to adjust for the declining value of the money resulting from higher prices.

The Other Three Functions
The standard of deferred payment function is one of four money functions. Three other functions are also worth noting.•Medium of Exchange: This function means that money is accepted throughout the economy as payment for goods and services. Buyers acquire goods by giving up money. Sellers receive money when parting with their goods. This is, without question, the most important function of money. This is the function that makes money MONEY.

•Unit of Account: This function means that money is used to designate the prices of goods and services. Any item that is generally accepted as payment for goods and services is also the obvious choice for denominating the prices of those goods and services.

•Store of Value: This function means that money can be used to purchase the same quantity of goods and services, that provide the same consumption value, in the future as it can purchase today. Inflation is the primary nemesis for the ability of money to store value.









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Recommended Citation:
STANDARD OF DEFERRED PAYMENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2015. [Accessed: September 18, 2015].


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Check Out These Related Terms...
| money functions | medium of exchange | unit of account | standard of deferred payment | value in use | value in exchange | commodity money | fiat money | money characteristics | M1 |


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Or For A Little Background...
| money | price | market | government functions | value | satisfaction | exchange | legal claim | inflation |


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| fractional-reserve banking | banking | money creation | monetary policy | Federal Reserve System | money supply | money supply, aggregate demand determinant | monetary economics | Keynesian economics | aggregate market analysis | business cycles |


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| Federal Reserve System | Federal Reserve Education | U.S. Department of the Treasury |

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Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.

Kết quả (Việt) 1:

Chức năng tiền trong đó tiền được sử dụng như là một tiêu chuẩn điểm chuẩn để xác định các khoản thanh toán trong tương lai để mua hàng hiện tại, đó là, mua bây giờ và trả tiền sau này. Chức năng này có thể có vẻ mơ hồ, nhưng đó là một kết quả trực tiếp của các cửa hàng giá trị và các đơn vị chức năng tài khoản. Đây là một trong bốn chức năng cơ bản của tiền. Ba khác là trung trao đổi, đơn vị của tài khoản, và lưu trữ giá trị. Sử dụng tiền như là một tiêu chuẩn bị trì hoãn thanh toán là một hậu quả trực tiếp của các đơn vị của tài khoản và lưu trữ các giá trị chức năng của tiền. Nếu tiền là tiêu chuẩn cho với giá hiện hành, sau đó tiền cũng là tiêu chuẩn cho các khoản thanh toán trong tương lai dựa trên các mức giá. Tuy nhiên, cho tiền để hoạt động như một thanh toán DEFERRED tiêu chuẩn, nó phải giữ lại giá trị, nó cũng phải lưu trữ giá trị.Mua bây giờ, trả tiền sau nàyTrong khi nhiều thị trường giao dịch gần như ngay lập tức, một tốt được trao đổi cho tiền khoảng cùng một lúc. Khi Duncan Thurly mua một nóng tin giờ chót sundae, ông tay người bán hàng kem hai, các hóa đơn đô la một hơi nhăn như các nhà cung cấp bàn tay anh ta một tươi chuẩn bị nóng tin giờ chót sundae. Tốt đi từ người bán cho người mua như tiền đi từ người mua cho người bán.Tuy nhiên, một số lượng giao dịch liên quan đến thanh toán trả chậm - mua ngay bây giờ, thanh toán sau. Tốt đi từ người bán cho người mua ngày hôm nay, nhưng tiền đi từ người mua cho người bán vào ngày mai.A common example of a deferred payment is that associated with buying a car, especially paying off a car loan. Duncan can get a loan to buy a car today, then pay off the loan with payments deferred into the future. In the same way that an immediate payment is stated in terms of the monetary unit, so too is any deferred payment.For example, Duncan can buy a $10,000 car by making one immediate payment of $10,000, or one or more deferred payments that total (at least) $10,000. Whether immediate or deferred, the payments are based on the price of the car, which is stated in the monetary unit of dollars.Inflation and InterestDeferred payments depend in part on price and the unit of account function of money, and in part on how well money stores value. This means that deferred payments depend on interest rates and inflation. In the preceding car-buying example, Duncan Thurly is unlikely to purchase a car with deferred payments that total ONLY $10,000. Suppose, for example, that Duncan plans to make one deferred payment a year after purchasing his $10,000 car. If the going interest rate is 10 percent, then Duncan's deferred payment is something like $11,000. The extra $1,000 (10 percent of the $10,000 price) is needed to compensate the seller for the interest lost when waiting a year to get paid. This 10 percent interest adjustment of the deferred payment is also dependent on inflation. A positive inflation rate (anything greater than zero) means that the interest rate is greater than 10 percent. That is, the seller also needs to be compensated for the loss of value resulting from higher prices. Alternatively, a negative inflation rate (anything less than zero) means that the interest rate is less than 10 percent.A 5 percent annual inflation rate means that the deferred payment for this $10,000 car is approximately $11,500. This amount is the combination of the $10,000 purchase price, the $1,000 interest, and an extra $500 to adjust for the declining value of the money resulting from higher prices.The Other Three FunctionsThe standard of deferred payment function is one of four money functions. Three other functions are also worth noting.•Medium of Exchange: This function means that money is accepted throughout the economy as payment for goods and services. Buyers acquire goods by giving up money. Sellers receive money when parting with their goods. This is, without question, the most important function of money. This is the function that makes money MONEY.•Unit of Account: This function means that money is used to designate the prices of goods and services. Any item that is generally accepted as payment for goods and services is also the obvious choice for denominating the prices of those goods and services.
•Store of Value: This function means that money can be used to purchase the same quantity of goods and services, that provide the same consumption value, in the future as it can purchase today. Inflation is the primary nemesis for the ability of money to store value.



<= STABLE EQUILIBRIUM STAR TREK SCARCITY =>





--------------------------------------------------------------------------------
Recommended Citation:
STANDARD OF DEFERRED PAYMENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2015. [Accessed: September 18, 2015].


--------------------------------------------------------------------------------
Check Out These Related Terms...
| money functions | medium of exchange | unit of account | standard of deferred payment | value in use | value in exchange | commodity money | fiat money | money characteristics | M1 |


--------------------------------------------------------------------------------
Or For A Little Background...
| money | price | market | government functions | value | satisfaction | exchange | legal claim | inflation |


--------------------------------------------------------------------------------
And For Further Study...
| fractional-reserve banking | banking | money creation | monetary policy | Federal Reserve System | money supply | money supply, aggregate demand determinant | monetary economics | Keynesian economics | aggregate market analysis | business cycles |


--------------------------------------------------------------------------------
Related Websites (Will Open in New Window)...
| Federal Reserve System | Federal Reserve Education | U.S. Department of the Treasury |

--------------------------------------------------------------------------------
Search Again?





Back to the WEB*pedia




APLS



State of the ECONOMY
Median weekly earnings
Second Quarter 2015
$801 / week
Down from the 1st quarter 2015

More Stats



RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time searching the newspaper want ads wanting to buy either a weathervane with a horse on top or a case of blank recordable DVDs. Be on the lookout for rusty deck screws.
Your Complete Scope

This isn't me! What am I?



Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.