ECON 295 Chapter Notes - Chapter 27: Interbank, Precious Metal, Chapter 27
5 Dec 2017
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What are its functions: function 1: money is a medium of exchange. Must be generally acceptable to perform this function. Barter is very inefficient due to the double coincidence of wants. If there were no money, goods would have to be exchanged in a system of barter: function 2: money is used as a store of value. Without high inflation, money retains its value. Rush to spend before value falls even more. Rush to spend further s inflation, until. People not accept money back to barter: function 3: money is used as a unit of account. The origins of money: money has evolved over time, taking various different forms, metallic money: Years ago, the market value of the metal was = to the face value of the coin. This led to debashing gresham"s law: paper money: Paper money was initially backed by precious metal. Often referred to as bank notes (issued by banks: fractionally backed paper money:
