Money+and+Banking - Money and Banking...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Money and Banking Elements of Money and the Role of  Financial Institutions
Background image of page 1

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

View Full DocumentRight Arrow Icon
Money Bride price in Highland New Guinea At the marriage, the groom’s family gives the  bride’s family gifts of pigs and shell belts The shell belts are exchanged only at  wedding services The shell belts are made in Lowland New  Guinea and pigs are traded for them Are the shell belts money?
Background image of page 2
Money What is money? Barter systems – we exchange goods for  goods I have lobsters to exchange and I want your  grain I have lumber to exchange but you don’t need it,  even though I need your grain I have a cow to exchange and I want a chicken
Background image of page 3

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

View Full DocumentRight Arrow Icon
Money Problems with barter systems How do you store up value How do you decide what each item is worth  in terms of other items How can you exchange for things you don’t  want but which might be of value to someone  else How do you make change if one item is  worth much more than others
Background image of page 4
Money Functions of money Medium of exchange, making exchanges of  unlike items possible Standard of exchange, setting the various  values of items Store of value, saving the value of one  exchange against later exchanges
Background image of page 5

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

View Full DocumentRight Arrow Icon
Money Implication of Money Exchanges Money allows you to measure the exchange  value of useful items Cow is useful because it gives milk and  eventually meat The exchange value of a cow depends on more  than its use value Some items have great exchange value but little  use value
Background image of page 6
Money Implications of Money Exchanges Money translates goods with use values into  goods with exchange values Once you have a money economy, you have  a whole separate system for conducting  exchanges Money exchange then operates on its own  systemic principles
Background image of page 7

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

View Full DocumentRight Arrow Icon
Money Characteristics of Items that Represent  Money Durable so it does not waste away Divisible so you can make change Transportable so you can carry it to market Difficult to counterfeit so there is a limited  supply
Background image of page 8
Money Where Does Money Come From? Currency is usually printed or minted by the  government and guaranteed by that  government The money supply is limited so that you only  get money from exchanging value you don’t just create money – that is  counterfeiting
Background image of page 9

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

View Full DocumentRight Arrow Icon
Money Banks and Money Function of a bank is to take money that is  not being used by one person and making it  available to another person Banks borrow from depositors and lend to  debtors The debtors repay the bank with interest –  rent on the money borrowed
Background image of page 10
Money Banks and Money But there is a special relationship between 
Background image of page 11

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

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 51

Money+and+Banking - Money and Banking...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online