Class Notes (836,147)
Canada (509,656)
POLI 243 (112)
Mark Brawley (109)
Lecture

The Politics of International Monetary Relations

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Department
Political Science
Course
POLI 243
Professor
Mark Brawley
Semester
Winter

Description
The Politics of International Monetary Relations International Media of Exchange 4/3/12 10:59 PM The Functions of Money • Why money helps markets work better • It allows specialization even at the domestic level • Money is a medium of exchange o the in between step in a transaction • Money serves as o a unit of measure o a medium of exchange o a store of value • How is money provided? • Influx of gold and silver from America to Europe brought more trade to Europe because metal was a good everyone wanted • Government action: Legal Tender • Managing Money o Confidence o Liquidity The Central Bank’s Role • Balancing confidence and liquidity • inflation is the result of too much liquidity • Two prices for money o the interest rate § raising interest ratesà lowering liquidity o the exchange rate: the international price of money • Mundell-Fleming noted the tension (aka the “trilemma”) o Fixed exchange rate: creates certainty for international transactions o Open capital controls: to invest and borrow abroad o domestic monetary policy autonomy à gov
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