ECON 209 Lecture Notes - Lecture 8: Precious Metal, Commercial Bank, Money Supply
9 Dec 2016
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Document Summary
What is money: money as a medium of exchange. Medium of exchange: anything that is generally accepted in return for goods and services sold. Without money : barter = a sy stem in wh ich good s and services are traded d irectly for other good s and services. Difficulty with barter is that each transaction requires: Double coincidence of wants: anyone specialized in producing one commodity would have to spend a great deal of time searching for satisfactory transaction. Ex: the barber who needs his sink repaired would have to find a plumber who needs a haircut. The double coincidence of wants is unnecessary when a medium of exchange is used. = money makes possible the benefits of specialization and the division of labour. Impossible to counterfeit: money as a store of value. Money is a convenient means of storing purchasing power. To be a satisfactory store of value = money must have stable value.
