Question

The newly discovered island of Mogran is in the process of setting up a new country and establishing a monetary system. The Mogran people start talking about the currency they would like to create.

The first proposal is to issue the Mogran Moola (their new currency) in only 3 denominations of paper bills (100, 500 and 1000 Moolas) but no coinage. In order to save time and resources they will print their currency on a heavy stock cardboard.

The bills will be about the size of a business card so that the Mogran people will be able to easily carry it with them in their wallets.

Why will the Mooola not function as a medium of exchange?

Answer 1

Answer and explanation:

The characteristic of money as a medium of exchange implies the parties involved in a transaction have currencies that facilitates the economical trade. Besides having uncomfortable cardboard presentations, Mogran's currency does not have a coin system which will make trade impossible for articles of low cost. Thus, the Moola is not achieving the medium of exchange feature of money.