| This question <557|557> overall <557|559> Hans: <556|563>. |
| Exam Question 322: Which two aspects of the function of money as a measure of value first look like flaws but on a closer look turn out to be necessary? |
| [558] Hans: Defects which are not really defects Through a technical error, this question did not show up in installment 2 and therefore you are not responsible for it. But here is its answer, in case you are curious. |
| (This is the last message I am sending out regarding the exam preparation. I still owe you grades for the term papers; apologies for the delay. The exam on Monday will be in FAMB 205. I will put a sign at the door of the usual classroom BuC 106. Thursday's exam will be in BuC 106. Hans.) |
| The two apparent defects are (1) the fact that the value of gold varies over time, with technical change in gold production. This is a good thing because the values of all other goods vary over time too. If technical progress proceeds at the same rate everywhere, then the variability of the value of gold allows prices to remain constant. |
| (2) the fact that prices usually deviate from values. This is a necessity because these deviations are the signals which allow production to adjust to demand. |
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