EC223 Chapter Notes - Chapter 3: Savings Account, Barter, Transaction Cost
Document Summary
Money (as in money supply defined by the economists): anything that is generally accepted in payment for goods or services or in the repayment of debts. Money (a stock concept) is different from: wealth: the total collection of pieces of property that serve to store value. Income: flow of earnings per unit of time and a flow concept. Barter economy: without money, g n s are exchange directly for other g ns. Problem: double coincidence of wants, high transaction costs. Unit of account: using money as unit of account reduces the number of prices, reduces transaction cost, and facilitate comparison of value, n goods: n(n-1)/2. Store of value: used to save purchasing power over time, other assets also serve this function, money is the most liquid of all assets but loses value during inflation. Cheques: allows transaction to take place without the need to carry around large amounts of currency.
