ECO105Y1 Lecture Notes - Lecture 20: Monetary Transmission Mechanism, Inverse Relation, Opportunity Cost

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30 Apr 2016
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Money is anything acceptable as a means of paying for products/services. In a barter world, say"s law is always true. The problem with barter exchange is that you must find a trading partner who not only is selling what you want, but who also wants is willing to accept what you are selling. Medium of exchange: its acceptability by all traders as a means of payment overcomes the problem of the double coincidence of wants. Unit of account: money provides a standard unit for measuring prices. Store of value: money allows you to separate supply from demand. Money, as a store of value, functions as a time machine moving the purchasing power of your wealth from the present to the future you can earn it now and spend it later. A bond is a financial asset where the borrower promises to repay the original value at a specific future date, and to make fixed regular interest payments.

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