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ECN 204 (282)
Chapter 10

Chapter 10

3 Pages

Course Code
ECN 204
Christos Shiamptanis

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ECN 204 Chapter 10The Monetary SystemTHE MEANING OF MONEYMoney the set of assets in an economy that people regularly use to buy goods and services from other peopleThe Functions of MoneyMoney has 3 functions in the economy Medium of Exchange Unit of Account Store of ValueMedium of Exchange and item that buyers give to sellers when they want to purchase goods or servicesUnit of Account The yardstick people use to post prices and record debtsStore of Value An item that people can use to transfer purchasing power from the present to futureLiquidity the ease with which an asset can be converted into the economys medium of exchangemoney is the most liquid assetbut it is not a good store of valueWhen prices rise value of money falls the relationship between price level and value of moneyThe Kinds of MoneyCommodity Money money that takes the form of a commodity with intinsic value ex Gold Cigarettes in WWIIIntrinsic Value item would have value even if it were not used as moneyFiat Money Money without intrinsic value that is used as money because of government decreeMoney in the CDN Economy Currency the paper bills and coins in the hands of the public Demand Dep
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