Lecture 4 Outline

Lecture 4 Outline - Lecture 4 The Role of Money in the...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 4 The Role of Money in the Macroeconomy I. Origin of Money a. A World of Barter b. Money as a Medium of Exchange II. Desirable Traits for Money a. Fungibility b. High value to weight c. High value to bulk d. Identifiable e. Divisible f. Storable III. Value of Money a. Demand for money holding i. Regression Theorem ii. Importance of Real Cash Balances b. Supply of money i. In a commodity system ii. In a fiat system IV. The Phenomenon of Hyperinflations a. Phase 1 i. Government funding itself through money creation rather than taxes or  debt?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. Taxes – politically unpopular, and (for Laffer curve reasons)  limited 2. Debt – also unpopular, and drives up interest rates, “crowding out”  investment.  This slows long-run economic growth. 3. Money creation – “inflation tax” is opaque enough that few realize  it. ii. As supply of money increases, prices often increase, but more slowly  than the supply of money.  Why?  Prices are expected to fall to normal  levels.  If you expect your money to be worth more tomorrow, you’ll spend  less of it today.  This keeps today’s prices in check. b. Phase 2 i. Expectations of public shift.  They see that prices will not fall to normal  levels, and that inflation is going to be a normal phenomenon.  This 
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 4

Lecture 4 Outline - Lecture 4 The Role of Money in the...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online