ECON 103 Chapter Notes - Chapter 16-1, 16-2 : Market Liquidity, Fiat Money, Debit Card
Document Summary
Cash/check/debit card represent a claim to goods and services in the future. An economy that relies on barter instead of money will have trouble allocating its scarce resources efficiently because trade requires the double coincidence of wants. As money flows through the economy, it facilitates production and trade, thereby allowing each person to specialize in what they do best and raising everyone"s standard of living. Money = set of assets in an economy that people regularly use to buy goods and services from each other: what people use to buy stuff from each other. Stock =/= money, you can"t use stock to directly buy food, you would have to first obtain some cash. Money has three functions: medium of exchange, unit of account, store of value. Money is not that great as a store of value because when goods/services become more expensive, each dollar can buy less (price level vs value of money)