MoneyandBankingCh.12.pdf - Money and Banking Money anything...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Money and Banking Money: anything universally accepted in an economy as payment as sellers/creditors -Is liquid: any asset that can be used for payment/disposed of with minimal transaction costs Functions: 1. Medium of exchange (without it: barter) 2. Unit of accounting: way of placing a price on goods 3. Store of value: doesn’t need to be used immediately 4. Standard of deferred payment: settle debts (both medium of exchange and unit of account) What backs money? Commodity money--grain, olive oil, etc. Representative money--backed by species gold/silver certificates Fiduciary (Fiat) money--money backed by Govt its value based on public’s faith -Not convertible to species -Coins, Fed. Reserve notes -Accepted in all transactions accounts -Anything you can write a check on (Banks, credit unions, S & L, etc.) -Purchasing power of money varies with the price level Gresham’s Law: “Bad money drives out the good” -Ex: dimes--pre-1965 had silver in it worth more than $0.10; post 1965--less Result: pre 65 dimes hoarded/melted Defining the Money Supply: Money supply→ the amount of money in circulation 1. Transaction Approach (M1→ Most liquid form of money) a.
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern