money.docx - Chapter 3 Money Characteristics needed for a good to serve as money Roles of money o Medium of exchange o Store of value o Unit of account

money.docx - Chapter 3 Money Characteristics needed for a...

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Chapter 3: Money Characteristics needed for a good to serve as money Roles of money o Medium of exchange o Store of value o Unit of account Why bitcoin is not money Measuring – money difficulties in measuring liquidity Inflation and seigniorage Hyperinflation Correction for inflation o Price indices o Real GDP Nominal and real variables Real GDP Real wages Real exchange rates 3.1 definition of money Good being sold was directly exchanged for good being bought o Barter o Required double coincidence of wants. Money is any asset used to intermediate exchange 3.1.1 required properties of money Durability, value easy to assess, divisibility, asset should be valuable o Universal acceptance 3.2 types of money Commodity o Intrinsic usefulness of money. (precious metals) o Precious metals - Can be stolen o Representative money – banks issued certificates of deposits o Fractional reserve banking – banks issued more certificates than reserves. Fiat o This note is legal tender = only bank of Canada can legally issue Canadian dollars 3.3 roles of money Medium of exchange o Liquidity Main benefit – reduction in the cost of conducting transactions
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  • Fall '13
  • LoganMcleod

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