econ3 9-1 - 2-11-08 Ch.9 (money, the price level and...

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Unformatted text preview: 2-11-08 Ch.9 (money, the price level and inflation) Money = means of payment can be many different o o Believe worth something has value when people believe it worth it (value of currency) Barter o The direct exchange of one good or service for other goods and services (hard to enforce) This naturally evolves into money expectation plays big role in economy. Means of payment o o Method of settling a debt. Accepting means debt - Money o o Any commodity or token that is generally acceptable as the means of payment. Could compare (stock could be similar effect) - Money is a medium of exchange o o Unit of account (common unit of measurement) Store of value (expectation) (ex. House, stock) - Demand for money o o o o The relationship between the quantity of money demanded and the nominal interest rate (ceteris paribus) Demand for money → demand to have cash readily accessible for transaction Higher interest, more we want to have bond and no money. (vice versa) Credit Card → you are loaning not real money Company is paying and pay back in future - Replace or substitute for money Decrease I.R., increase keeping money ...
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econ3 9-1 - 2-11-08 Ch.9 (money, the price level and...

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