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Mechanism of Exchange: a Handbook of Economics

THE various economic problems dealt with in this book are comprised under one general heading, the Mechanism of Ex- change. Economics may be defined (somewhat elliptically1) as the science of exchange values or the science of prices, which are exchange values expressed in terms of money. Money in the widest sense of the word, including metallic money, paper money, bankers’ money, and the credit system, is the means of exchange.

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Todd , John . A

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Parimāṟṟa vaḻimuṟai: Poruḷātārattiṉ kaiyēṭu




Oxford University Press

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The essential purpose of exchange is the determination of the relative values of different commodities to each other, and these values are for convenience expressed in terms of money as prices. The use of money, however, as a means of exchange must not be allowed to obscure the fact that the real value of any commodity is not the amount of money for which it is exchanged, that is to say its price, but the amount of other commodities which can be obtained, now or later on, in exchange for that money. Price is only a means of expressing the relative value of two commodities, by comparing them, not directly with each other, but indirectly through the universal third commodity, money. For instance, it is more convenient in discussing the relative value of a pound of tea and a pound of sugar to say that the one is worth 2s. 6d. and the other worth 3d. than to say that the one is worth ten of the other. Money is therefore the standard of value, the means by which the value of different things is measured against each other, just in the same way as the relative height or weight or age of things is measured, not by comparing them with each other, but by describing each of them in terms of certain accepted standards known as feet, pounds, or years.


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