ECON 1102 Lecture Notes - Lecture 26: Commercial Bank, Commodity Money, Reserve Requirement
8 Mar 2018
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Document Summary
Money is any generally accepted medium of exchange. > when families were mainly self-sufficient, each producing and consuming what it produced, little need for exchange. > barter depends on a double coincidence of wants. > commodity money takes the form of a commodity with instinct value. > this transferring of paper receipts rather than gold was essentially the invention of paper (or fiat) money. > fiat money is money without instinct value, used as money because of government decree. > paper money was later issued by banks (called bank notes): money has three functions: > medium of exchange: an item buyers give to sellers when they want to purchase good and services in enabling greater specialization, money increases the productivity of the entire economy. > unit of account: money is also a measure of value, a standard on which prices are based. It is the yardstick people use to post prices and record debts.
