3 Money

3 Money - What is Money? Prof. Irina A. Telyukova UBC...

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What is Money? Prof. Irina A. Telyukova UBC Economics 345 Fall 2008
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2 ± In order to understand the role of money in the economy, we first have to know what we mean by the word. ± Defining it precisely, and measuring it, is important – and a non-trivial task. ± We look at the basic characteristics of what makes an object money. Outline
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3 ± An object is called money if it can be used in payment for goods and services, payment of taxes, or repayment of debts. ± An exception: credit cards fit all of those definitions, but are not considered money by economists (the are instead counted as debt). ± Money is NOT the same as wealth. ± Money is NOT the same as income. What do we mean by “money”?
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4 ± A medium of exchange ± Barter is hard: double coincidence of wants. ± A medium of exchange helps overcome frictions between buyers and sellers (i.e. LACK of double coincidence of wants; anonymity) – that is, a reduction in transaction costs. ± Good medium of exchange is: recognizable/widely accepted;
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This note was uploaded on 06/21/2011 for the course ECON 345 taught by Professor Sumaila during the Spring '09 term at UBC.

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3 Money - What is Money? Prof. Irina A. Telyukova UBC...

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