POLI 243 Lecture Notes - Wok
23 Apr 2013
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A store of value( cant be a form of credit, if you sell goods, you can hold onto money) Why money helps markets work (convert a system of goods and services into a medium of exchange) They can use authority to make the money work. Convince people, that money is something or use and of value. Traditional fashion of doing this: make money out of something that was intrinsically desired. Although, problem is that people need to be willing not give it up for goods and services. Confidence in the paper money, although there will not be enough paper money to buy things, because there is a restricted amount of gold. Two options for analyzing how value of money is changing: interest rate(when interest rates go up stressing confidence, exchange rate. Mundell and fleming each noted separately the tension here( a. k. a the. Two different markets for same item, domestic market and foreign market.
