It also seems likely that this system of barter did

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value. It also seems likely that this system of barter did not allow great certainty as to the price of anything. In this case, it is likely that some paid to attend the concert by exchanging 1 pig, others perhaps by exchanging various quantities of fruit and vegetables. It is hard to see how unit values would have remained consistent across purchasers. Finally, it is hard to see how this system could easily have facilitated deferred payment, although this may not have been a big problem in 19 th century Polynesian islands. Having said all that, we need to be mindful that this system was likely used in such societies for possibly thousands of years and so perhaps our criticisms if this system is merely a reflection of the complexity of our more contemporary economic and social environment. Question 2. Assume that you have $2000 in currency in a shoebox in your cupboard. One day you decide to deposit the money in a demand deposit account. Briefly explain how this will affect M1. Notes: The $2000 kept in the shoe box would have been counted as part of currency in circulation. By taking it out of the shoebox and transferring it to a demand deposit, currency will fall by $2000 whilst demand deposits will increase by $2000. But since currency and demand deposits are both part of the M1 money supply, M1 will not change.
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  • One '14
  • Microeconomics, Cheque, commonwealth bank, cheque account deposits

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