LEARNING OBJECTIVES
After you have read this section, you should be able to answer the following questions:
What is arbitrage?
What is the law of one price?
Having defined money through its characteristics and functions, we now turn to the uses of money. By looking at what we can do with money, we can understand how intrinsically worthless pieces of paper acquire their value.
Let us imagine, then, that you are lucky enough to find a $100 bill on the sidewalk. You have no way of returning it to its rightful owner. What might you do with this money? The first and most obvious answer is that you can use it to buy something you want: you can take the $100 and purchase some goods and services.
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