Economics 2153A/B Lecture Notes - Lecture 7: Real Interest Rate, Nominal Interest Rate, Real Wages

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In this part of the course we will be studying the economics of money. This is a branch of macroeconomics that is called monetary economics and it is a field that many economists spend their whole careers researching. It is also a very practical area for anyone interested in finance or banking. The concept we must first articulate is the purpose of money . This may seem like a trivial question but when you think of it, the money we have in our pockets is intrinsically worthless. That is; we can not eat it or wear it or otherwise consume it. Money only has worth because we all agree that these specially printed pieces of paper can be transferred into goods and services now and in the foreseeable future. We all trust the currency and therefore we all use it as a medium for exchange.

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