LN3-Money

LN3-Money - WHAT IS MONEY? Key Topics Characteristics of...

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WHAT IS MONEY?
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Key Topics • Characteristics of Money • Types of Money • Barter vs. Monetary Exchanges • Inside vs. Outside Money
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Money: Its Functions • Store of Value. • Medium of Exchange. • Unit of Account.
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Money Over Time • Commodity Money. • Circulating Private Notes (Free Banking Era). • Commodity-Backed Paper Currency. • Fiat Money. • Transactions Deposits at Private Banks.
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Commodity and Fiat Money • Money facilitates trade (exchange). •S o l v e s t h e absence of double coincidence of wants.
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Commodity and Fiat Money • Simple world: 3 agents, 3 commodities. Produces #2 Consumes #1 Produces #1 Consumes #3 Produces #3 Consumes #2
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Commodity and Fiat Money • Barter (trade for immediate consumption) isn’t possible. Produces #2 Consumes #1 Produces #1 Consumes #3 Produces #3 Consumes #2
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Commodity and Fiat Money • Good 1: endogenous commodity money. Produces #2 Consumes #1 Produces #1 Consumes #3 Produces #3 Consumes #2 Good 1 Good 3 Good 1 Good 2
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LN3-Money - WHAT IS MONEY? Key Topics Characteristics of...

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