Why isn’t the time value of money applied to currency in terms of purchasing power? Let’s say I have a dollar from 1930. I should be able to exchange that dollar today anywhere based on its present value, right? Doesn’t make any sense to me but I’m slow
In: 9
Money itself IS the unit of measurement of “value”. As an analogy, consider taking a small child who is the exact height of a yard stick. A unit of money (in this case a dollar) is the yard stick itself, NOT the height of the child. You’re mentally tying the height of the yardstick to the thing being measured right now, which is incorrect. The child will grow, the yardstick will not.
Money itself IS the unit of measurement of “value”. As an analogy, consider taking a small child who is the exact height of a yard stick. A unit of money (in this case a dollar) is the yard stick itself, NOT the height of the child. You’re mentally tying the height of the yardstick to the thing being measured right now, which is incorrect. The child will grow, the yardstick will not.
Money itself IS the unit of measurement of “value”. As an analogy, consider taking a small child who is the exact height of a yard stick. A unit of money (in this case a dollar) is the yard stick itself, NOT the height of the child. You’re mentally tying the height of the yardstick to the thing being measured right now, which is incorrect. The child will grow, the yardstick will not.
The reason why the time value of money isn’t applied to currency is simply because it’s just not practical. If we were to adjust the value of every single dollar bill based on its age, it would create chaos and confusion in the financial system. Plus, it would require a lot of time, effort, and resources to keep track of every single piece of currency out there. So, for the sake of simplicity and efficiency, we just stick with the face value of the currency, regardless of how old or new it is.
The reason why the time value of money isn’t applied to currency is simply because it’s just not practical. If we were to adjust the value of every single dollar bill based on its age, it would create chaos and confusion in the financial system. Plus, it would require a lot of time, effort, and resources to keep track of every single piece of currency out there. So, for the sake of simplicity and efficiency, we just stick with the face value of the currency, regardless of how old or new it is.
The reason why the time value of money isn’t applied to currency is simply because it’s just not practical. If we were to adjust the value of every single dollar bill based on its age, it would create chaos and confusion in the financial system. Plus, it would require a lot of time, effort, and resources to keep track of every single piece of currency out there. So, for the sake of simplicity and efficiency, we just stick with the face value of the currency, regardless of how old or new it is.
Could you imagine how long the drive thru line would be if they had to make change for a 1934, 1986 and a 1967 dollar
Could you imagine how long the drive thru line would be if they had to make change for a 1934, 1986 and a 1967 dollar
Could you imagine how long the drive thru line would be if they had to make change for a 1934, 1986 and a 1967 dollar
Latest Answers