ECN 211 L15 Money and Banks_BB

ECN 211 L15 Money and Banks_BB - ECN 211 Macroeconomic...

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05/07/09 1 ECN 211 Macroeconomic Principles L15:  Money and Banks
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05/07/09 2 What is Money? Money … anything that is ___________________to sellers in  exchange for goods and services Examples
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05/07/09 3 Wealth and Money People hold their wealth in many different forms: –   –   –   –   Why? – A  ________________  trade-off – Note: we are going to ignore the risk/return tradeoff
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05/07/09 4 Liquidity ______________ … an asset that can easily be exchanged for goods and  services ____________ liquidity implies  ____________ returns Money is the most  _____________ – Therefore has the lowest (zero return).
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05/07/09 5 Functions of Money ‘Money is a matter of functions four  – a medium, a measure, a standard and a store’
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05/07/09 6 ______________ – It lowers  _______________ – Do not need the “double coincidence of wants” _________________ – All goods and services are priced in  _______________________ – Allows us to compare  __________ easily. – Only need ___________of prices.
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05/07/09 7 ____________ – Money retains its value through time  _________ – Need to control inflation. Standard _______________ – Money may be used to make  ___________ – ______ is written in dollar amounts.
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Other properties of money ________ – Has to be portable to be an effective medium of  exchange.
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