MAF101 Lecture Notes - Lecture 4: Australian Prudential Regulation Authority, United States Treasury Security, Capital Formation
Document Summary
Money = set of assets in an economy that people regularly use to buy goods and services from other people. 3 functions: medium of exchange, unit of account, store of value. Defined as anything that is readily acceptable as payment. Barter = trade in goods or services without the use of money. Requires double coincidence of wants the use of money avoids search and transaction costs. Defined as the yardstick people use to post prices and record debts. Originally units of money were determined by the weight of the metal. Usually the same as the medium of exchange, but not always. Defined as an item that people can use to transfer purchasing power from the present to the future e. g. , you can sell crop for gold coins in september and use the gold coins to buy food in january. Anything you can store e. g. rice, corn can perform this function, however money is more convenient due to ease of storage.
