Analyzing the Bitcoin Phenomenon Term Paper

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Explain the Functions of Money

Money as a Means of Exchange

This is a vital function of money in an economy because without money, the only way of exchanging goods and services would be by means of barter, which implies a direct exchange of one commodity for another. The economies we line in are monetary economies in which most of the goods and services produced are exchanged via the intermediary of money, rather than through barter. Whenever money is used to pay for goods and services or for the purpose of settling transactions, it is functioning as a medium of exchange (Jain et al., 2011).

Money as a Unit of Account

Money ought to be able to measure exactly what something is worth. Money should provide an agreed standard measure by which the value of different goods and services can be compared. This implies that the function of money in the economy would be to establish a common unit of measurement by which the relative exchange values or prices of goods and services can be established. Money provides a convenient means of measuring economic phenomena (Jain et al., 2011).

3. Money as a Standard of Deferred Payment

The function of money in this respect allows people to delay paying for goods and services or settling a debt, even though goods and services are being provided immediately. Money acts as a standard of deferred payment whenever firms sell goods "on credit." Money facilitates the extension of credit by specifying the unit of future payment (Jain et al., 2011).

4. Money as a Store of Value

This function of money arises when, instead of spending money, a person decides to store his or her wealth in the form of money rather than other forms of wealth such as property or financial assets,
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like shares. This implies that the purchasing power of money is transferred into the future, although this may be eroded by inflation. Money, therefore, permits income recipients to postpone consumption or save on the basis that the money can be used for future consumption (Jain et al., 2011).

Explain the two objectives of the Federal Reserve in managing the U.S. money supply, and how it adjusts the money supply to meet them

The supply of money can be delineated to develop into a number of secure assets that family units as well as firms can utilize for payments purposes or to influence as investments of short-term. For instance, U.S. balances and currency held in checking accounts as well as savings accounts have been encompassed in several measures of the money supply. Federal Reserve policy is the most significant determining factor of the money supply. The Federal Reserve influences the money supply by influencing its most imperative element, bank deposits. The function of the Federal Reserve has grown and in the present day, the Fed first and foremost manages the growth of bank reserves and money supply with the main objective of making sure that there is a stable expansion of the economy. The other second objective of the Federal Reserve in managing the U.S. money supply is to influence and determine the amount of money as well as credit that is there in the United States economy. Therefore, through these aspects, the Fed is able to maintain prices that are stable and as a result, supporting conditions and circumstances for economic growth in the long run and also maximum employment (Schwartz, 2008).

What functions of money are served by bitcoins?

One of the main functions of money served by Bitcoins is as a measure of value. It is very much possible to measure the value of…

Sources Used in Documents:


Goldstein, J., Kestenbaum, D. (2011). What is Bitcoin? NPR. Retrieved 4 April 2016 from:

Jain, T. R., Ohri, V. K., Mahji, B. D. (2011). Principles of Macroeconomics. New Delhi: VK Publications.

Krugman, P. (2013). Bitcoin is Evil. The New York Times. Retrieved 4 April 2016 from:

Schwartz, A. J. (2008). Money supply. The Concise Encyclopedia of Economics.

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