Bobby is confused. He states: "Since prisoners are not allowed to smoke in prisons any longer, Radford's examples of cigarettes in POW camps no longer applies." How would you explain to Bobby how Radford's story demonstrates the concepts of the criteria of money, as well as the importance of changes in the money supply?

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Business

Jayda Bauer

12 May, 01:14

Bobby is confused. He states: "Since prisoners are not allowed to smoke in prisons any longer, Radford's examples of cigarettes in POW camps no longer applies." How would you explain to Bobby how Radford's story demonstrates the concepts of the criteria of money, as well as the importance of changes in the money supply?

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Jacobson · Answer 1

Answer: The criteria of money that applies here is commodity money.

Explanation: Commodity money are items that can be used as money. They are assets that have intrinsic value and, value in purchasing other items with. N prsioners of war (POW) camps, commodity money is often used as value to exchange goods and services. The criteria to qualify as commodity money as well as the application to Radford's example is explained below:

1. The commodity item must be easy to carry - cigarettes come in small packs that fit into the palm of most pockets, thus making it easy to carry.

2. This item must last, and not spoil over time - cigarettes were extremely durable and could last over long periods of time.

3. The item must be able to divide easily - the cigarettes come in packets consisting of 20 cigarettes per pack, making it easily divisible into single cigarettes.

4. All the items that fall under one type of commodity money must be homogenous - all the cigarettes in the packs were the same as they contained similar quantity and quality of tobacco.

5. The item must be widely demanded - a lot of prisoners demanded cigarettes so they could smoke them to release tension and lower their stress levels.