ACC 1110 Lecture Notes - Lecture 4: Fractional-Reserve Banking, Money Creation, Financial Intermediary
11 Feb 2018
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Document Summary
Money = an asset widely accepted as a means of payment. Functions of money: medium of exchange, unit of account, store of value (inflation non-withstanding) 2 types of money: commodity monies. Items used as money, also has intrinsic value in some other use: fiat monies. Items designated as money that have no intrinsic value. Value of money: arises not from its intrinsic value, but its value in exchange for goods and services. What backs the money supply: money and prices, purchasing power of the dollar, value of dollar = 1/price level. If the price level is 1, value of dollar is. Etc: inflation and acceptability, stabilizing the purchasing power of money. Will talk about us financial crisis later. The importance of a properly functioning financial system: the u. s. Financial crisis of 2007-2008: mortgage default crisis. Many causes: government programs that encouraged home ownership, subprime loans, bad incentives provided by mortgage-backed bonds.
