ECON 1010 Lecture Notes - Credit Union, Price Level, Financial Innovation
5 Apr 2013
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Document Summary
Any commodity measured as a form of payment = money. Serves 3 functions: medium of exchange. Object generally accepted in exchange for goods and services. Money makes possible the benefits of specialization and division of labour. Credit card is an example of a medium of exchange. Creates a debt; doesn"t make a final payment. Characteristics that the commodity (money) needs to fulfil: Formal list (found on wikipedia): value common assets, constant utility, low cost of preservation, transportability, divisibility, high market value in relation to volume and weight, recognisability, resistance to counterfeiting: unit of account. Common denominator for all goods and services. Allows for a meaningful interpretation of prices: store of account. Other examples: gold, artwork, real estate, exotic cars, anything else unique. Monetary system can only function if everyone using it trusts that the commodity has the value it says it does, and that everyone accepts it as such. In canada, money exists in two ways: currency.
