money Is a nignly iqula Tinanciar asser that is generaly acceprea In excnange for otner assers or goods, is used as a reference In valuing otner assers or gooas, and can be storea as wealtn.

To be liquid means to be easily changeable into other assets or goods. When you buy something with money, you are exchanging money for it So, any of your assets that are easily spendable are money. Social customs and standard practices are central to the liquidity of money. The reason you are willing to hold money is that you know someone else will accept it in trade for something else. Its value is determined by its general acceptability to others. Money can serve as a medium of exchange. The easiest way to understand money' s medium-of exchange use is to imagine what an economy would be like without money. Direct exchange of commodities without the medium of money- -barter- -can work tolerably well in economies where only a narrow range of goods and services are exchanged, but it becomes extremely cumbersome when there is a wide range of commodities. The use of money as a medium of exchange makes it possible to trade real goods and services without bartering. Instead of carrying around a sack full of diverse goods, all you need to carry around is a bllfol full of money. Money does not have to have any inherent value to function as a medium of exchange. All that is necessary is that everyone believes that other people will accept it in exchange for their goods. This neat social convention makes the economy function more smoothly. The social convention depends on there not being too much or too ltte money. If there is too much money compared with the goods and services offered at existing prices, the goods and services will sell out, and money will not buy you anything, or prices will rise. If there is too ltte money compared with the goods and services ofered at the existing prices, there will be a shortage of money and people will have to resort to barter, or prices will fall. Since the central bank controls the supply of money, it also controls the value of money as a medium of exchange. Money can serve as a unit of account. Money can be used for accounting purposes, to measure the relative exchange values of different goods and services. A bicycle, for example, can be said to be worth RMB 500 and an automatic washing machine RMB 1,500. This indicates that the automatic washing machine is worth three times as much as the bicycle. Money is a useful unit of account only as long as its value relative to the average of all other prices does not change too quickly. For example, in hyperinflation all prices rise so much that our frame. of reference for making relative comparisons is lost. Money can also be used to add up the value of different commodities. In this way, we can measure the entire output of an economy producing a variety of goods and services. Money can serve as a store of value. Money is a financial asset. So a third use of money is as a store of value. As long as money is serving as a medium of exchange, it automatically also serves as a store of wealth. Money serves as a way to accumulate wealth until it is spent. The restaurant owner can accept your money and hold it for as long as he or she wants before spending it. (But had you paid him or her in fish, he or she would be wise not to hold it for more than a few hours,) A person making RMB 5,000 per month who wants to buy a RMB 3,00-computer could save RMB 500 per month for each of the next months. To be a satisfactory store of purchasing power, however, the value of money should be reasonably stable over time. If RMB 180 can buy two pairs of jeans in 2015, but only one pair in 2016, people are not going to be too confident in the RMB as a store of value. Unfortunately, the value of stored money is directly dependent on the health of the economy. If, due to rapid inflation, all prices double in one year, then the purchasing power of the money would fall by half. Conversely, savings will buy more when prices fall as a result of recessions. 41. Money is a highly liquid financial asset because of the following reasons except that. A. it has the inherent value to function as a medium of exchange B. itis generally accepted in exchange for other assets or goods C. it can be used as a reference in valuing other assets or goods D.it can be stored as wealth 42. Which sentence is the topic sentence of the second paragraph？ A. The last sentence. B. The first sentence. O C. The second sentence. D. The third sentence. 43. Money has the following functions except that ______. A. it serves as a medium of exchange B. it serves as a unit of account C.itcan be used as a store of wealth D. it has its own weight 44.Barter becomes very ______ when there is a wide range of commodities and services that are exchanged. A. quick B.easy C. eficient D. inconvenient 45. Money can serve as a medium of exchange because of the following except that______ A. money has its inherent value B. money makes it possible to trade real goods and services without bartering C. money can be crried more easily than other goods D. people accept money in exchange for their goods