Lecture_4-topic_3 - TOPIC 3 MONEY Case Fair(Ch 23 24...

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TOPIC 3: MONEY Case & Fair (Ch. 23 & 24)
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CHAPTER OUTLINE An Overview of Money What Is Money? Commodity and Fiat Monies Measuring the Supply of Money How Banks Create Money The Creation of Money The Money Multiplier How the Federal Reserve Controls the Money Supply The Required Reserve Ratio The Discount Rate Open Market Operations The Demand for Money The Transaction Motive The Speculation Motive The Precautionary Motive The Total Demand for Money The Effect of Nominal Income on the Demand for Money
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3 WHAT IS MONEY? 1. A means of payment/ medium of exchange : . What sellers generally accept & buyers generally use to pay for G&S. . Eliminates the double- coincidence- of- wants required in barter system.
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4 WHAT IS MONEY? (CONT.) 2. A store of value: . An asset that can be used to transfer purchasing power from one time period to another. . Liquidity property of money – is portable & readily accepted, thus easily exchanged for goods.
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5 3. A unit of account : . A standard unit that provides a consistent way of quoting prices. . All prices are quoted in monetary units. WHAT IS MONEY? (CONT.)
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6 COMMODITY & FIAT MONEY Commodity money – items used as money that also have intrinsic value in some other use; i.e. gold, silver, copper etc. Fiat money – items designated as money that are intrinsically worthless. Govt. declares its paper money to be legal tender – money that a govt. has required to be accepted in settlement of debts.
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7 MONEY SUPPLY M1: transaction money – money that can be directly used for transactions. M2: broad money – includes not- quite- money monies, such as savings accounts, money market accounts and other near monies.
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Currency in circulation plus demand deposits equals M1 plus savings deposits plus fixed deposits plus NIDs plus Repos plus foreign currency deposits plus other deposits equals M2 plus deposits with other banking institutions equals M3 2008 Data (RM billions) 40.4 142.4 182.8 92.2 411.2 33.5 158.5 39.3 144.0 903.2 931.7 28.4 Monetary Aggregates by BNM (Table 1.3)
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Bank Negara Malaysia is the central bank for Malaysia.
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  • Summer '16
  • alicia
  • Monetary Policy, Federal Reserve System, Fractional-reserve banking, MD

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