ECO102H1 Chapter Notes - Chapter 27: Barter, Reserve Requirement, Excess Reserves
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ECO102H1 Full Course Notes
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Document Summary
Money is any generally accepted medium of exchange, which means anything widely accepted in a society in exchange for goods and services. Barter is the system whereby goods and services are exchanged directly with each other. The major difficulty with barter is that each transaction requires a double coincidence of wants: anyone who specialized in producing one commodity would have to spend a great deal of time searching for satisfactory transactions. By facilitating transactions, money makes possible the benefits of specialization and the division of labour. As a result, money greatly contributes to the efficiency of the economic system. Money must be easily recognizable, readily acceptable, high value relative to its weight, divisible, reasonable durable, and it must be difficult, if not impossible, to counterfeit. Money is a convenient means of storing purchasing power; goods may be sold today for money and the money may then be stored until it is needed for some future purchase.
