ECON1132 Study Guide - Midterm Guide: Real Interest Rate, Phillips Curve, Hyperinflation
Document Summary
Money should be durable, divisible, and limited in supply. Tobacco, cigarettes, and wampum have all been used as money. For ease in transactions, in anticipation of transactions to be made. Store of wealth: to be able to act immediately if an investment opportunity arises. Liquidity how easy it is to turn an asset into cash at a low cost. Portfolio theory how people weigh risk, return, and liquidity in the management of their assets. At higher interest rates, people find that they can get by with less cash. Commercial banks business firms that earn a profit from providing people with services such as receiving demand deposits and providing credit and loans. Banks earn their profit from the interest they charge on loans. Central banks public institutions that are lenders of last resort and stabilizers of the economy by controlling money and credit to pursue stable growth without inflation. Balance sheets balance the assets against the claims against them.
