Ch. 3: Money and Payments
1. How we use money
A: Medium of exchange
Exchange money for foods and services
historically gold and silver coins
B: Money serves as unit of account: prices are denoted in terms of money. When
the Bank System fails, the barter system prevails.
C: Store of Value: when people save money(Inflation can eat into s.o.v)
D: Standard of Deferred Payments: buy now pay later
2. The Payment System(money created by govt.)
A) Commodity Money
gold and silver
B) Fiat Money
breakup the link between gold and money(1934)
this led to the Gold Exchange Standard(3471). Conversion to gold only by
foreign banks using USD dollars.