EC140 Lecture Notes - Lecture 9: Federal Reserve System, European Central Bank, Fiat Money
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EC140 Full Course Notes
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Document Summary
Money as a medium of exchange: widely accepted in exchange for goods/services, eliminates the need for barter, easily recognizable, high value to weight, divisible, durable, diicult to counterfeit. Money as a store of value: means of holding purchasing power to a future ime period, must have a stable value. Money as a unit of account: used by people, irms and the government to account for transacions. Metallic money: easily recognized, divided into small units, gresham"s law bad money drives out good . Paper money: started as deposit slips that could be traded, moved to fracional system, but converible to valued commodity gold standard. Fiat money: converible money is limited by the supply of gold, moving to non-converible currency increases lexibility for governments. Medium of exchange: fiat money is widely accepted, as required by law, may be used to pay taxes.