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Economics

Question

Why do we have money?

Answer

So we don't have to use the barter system anymore. The barter system was great, but it was hard to quantify exactly how much someone's assets were worth as a common value to represent everyone's views. For example, you could give me a chicken, and in exchange, I'd change the oil in your car. But what if the next time you gave me a chicken, it was about one and a half times better than the one that you gave me the last time? Would I have to give you an oil change and a half? Now, since we have money, your chicken is worth a specific amount, and my oil change is worth a specific amount. Maybe you could still talk me into taking the new chicken, but now you could also talk me into making up the difference with money.


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