chap1-outline

chap1-outline - A few concepts rst: Money is anything that...

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Unformatted text preview: A few concepts rst: Money is anything that is generally accepted in payment for goods and services and for the repayment of debts. { \generally accepted": money is largely a social convention. What actually constitutes money in a society depends on what people in the society are generally willing to accept as money. { An interesting question is how this \general acceptance" comes to be established. Functions of Money. { Medium of exchange | an accepted means of payment for trade of goods and services. Money is essential in exchanges: the use of money as a medium of exchange pro- motes economic e ciency by minimizing transaction costs of trading, e.g., time spent in trading. Money helps to overcome the lack of a double coincidence of wants among people. A double coincidence of wants between two individuals seeking to trade is a situation at which they have exactly the goods or services that each other wants....
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This note was uploaded on 04/06/2010 for the course ECON ECON taught by Professor Econ during the Spring '10 term at Penn State.

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chap1-outline - A few concepts rst: Money is anything that...

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