CHAPTER 2

Money and Monetary Systems

Money and Our Living Standards

Markets are a spontaneous social institution where voluntary exchange occurs. They are one of our most important institutions, because of their enormous contribution to our material living standards. Every time voluntary exchange occurs, wealth is created. The wealth creation is not in the form of additional goods and services. Rather, it is in the form of additional value derived from those goods and services that are produced.

Voluntary exchange is predicated on valuation discrepancy. Individuals value things differently. In the process of exchange, each party gives up something they consider to have lesser value in exchange for something they perceive to have greater value. ...

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