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The transaction theory of money posits that money primarily serves as a medium of exchange, facilitating transactions in an economy. This theory emphasizes the role of money in reducing the costs and complexities associated with bartering, allowing for more efficient trade. By providing a common measure of value and a widely accepted means of payment, money enhances economic interaction and promotes market efficiency. Ultimately, it underscores the importance of liquidity and the convenience that money offers in everyday transactions.

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2mo ago

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How does a cash transaction differ from a credit transaction?

A cash transaction is actually using money you have at the time ; A credit transaction is spending money that you don't actually pay immediately , but at a later date


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MV=PT M is the money stock V is velocity of circulation P= average price of trasaction T= number of transaction It is defined as the value of money spent is equal to the value of goods and services sold. And its relationship with the quantityntherory of money, the MV=PT , provides a basis for the quantity theory of money


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