Macro: Aggregate Supply and Demand Analysis

Macro: Aggregate Supply and Demand Analysis

1. Why is universal acceptability such an important characteristic of money? What other characteristics can you think of that might be important to market participants?
2. One explanation given for the upward slope of the short-run aggregate supply curve is the existence of “sticky prices”. Give an example of a good or service whose prices are sticky. What factors tend to make its price sticky?

Provided a minimum of 300 words. Selected will be provided ebook, if needed.

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Q1. Characteristics of money

Money is defined as the medium of exchange or the means of payments of goods and services and the means of settling debts. Universal acceptability of money is the primary goal of promoting medium of exchange. The function of money is to serve as the liquid of wealth a means of converting goods and services into monetary value. This enhances the exchange of goods and services easier, unlike the barter trade system. With universal acceptance of money makes it a means to measure the value of goods and services. Money can be used to regulate purchasing power over time and can be stored to purchase goods when the demand for services is high (Shernett Hall).

(465 words)