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10_Lecture_Slides_wi - Economics 104 Fall 2010 1 Money& Banking Readings — Chapter 13 Outline 1 Money 2 Banking 3 Central Banking 4 Quantity

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Unformatted text preview: Economics 104 Fall 2010 1 Money & Banking Readings — Chapter 13 Outline 1. Money 2. Banking 3. Central Banking 4. Quantity Equation & the Velocity of Money Economics 104 Fall 2010 2 1. Money ◦ Money is defined as any asset that can be used as a means of payment for purchases and to settle debts. . Commodity money — an asset with intrinsic value generally accepted as a means of pay- ment. General features: storable, transportable, and verifiable (difficult to counterfeit) and accepted as a means of payment. Examples: gold, silver, shells, cigarettes, ... history is full of different commodity moneys. . Fiat money — an asset with no intrinsic value generally accepted as a means of payment. General features: storable, transportable, and verifiable (difficult to counterfeit) and accepted as a means of payment. Examples: – Canadian currency notes and coins – A debit or chequing account Economics 104 Fall 2010 3 ◦ Money has three uses: (1) Medium of exchange . Used a means of payment. . Eliminates the need for barter . (2) Unit of account — how we measure economic transactions. . It is convenient and usual — but not necessary — to use the same asset as the medium of exchange and the unit of economic account. (3) Store of value — a means of holding wealth. . Pays little or no interest so better assets are available. . Store of value (in part or in whole) is derived from its role as a medium of exchange. Economics 104 Fall 2010 4 ◦ Measuring money . What exactly constitutes money in the Canadian economy is open to interpretation....
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This note was uploaded on 01/28/2011 for the course ECON 104 taught by Professor Voss during the Winter '10 term at University of Victoria.

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10_Lecture_Slides_wi - Economics 104 Fall 2010 1 Money& Banking Readings — Chapter 13 Outline 1 Money 2 Banking 3 Central Banking 4 Quantity

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