ECON 110 Chapter Notes - Chapter 27: Canadian Imperial Bank Of Commerce, Excess Reserves, Reserve Requirement
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ECON 110 Full Course Notes
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In the long-run, an increase in money won"t increase potential real gdp, but has important effects in the short-run. Medium of exchange: anything generally accepted in return for goods and services sold. Without money, we"d have to use barter system (goods traded directly for other goods) which requires a double coincidence of wants. Money allow for specialization and division of labour. Must be durable, widely accepted, hard to fake, easy to carry. Money is only a good store of value when the value of money is relatively stable. Hyperinflation occurs when inflation exceeds 50% per month, only likely in cases of war, government upheaval. Used to use gold and silver, measured for each transaction until the development of coins. Ribbing on the edge of a coin was preventative measure for clipping small amounts off to keep. Debasing coins (mixing in less valuable metal) increased the overall money supply, and caused inflation.