EC140 Lecture Notes - Lecture 14: Reserve Requirement, Cheque Clearing, Interbank
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EC140 Full Course Notes
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Document Summary
Chapter 26 - key learning objectives: describe the functions of money, and how it has evolved over time. Understand how privately owned commercial banks and government-owned central banks operate in a modern banking system: describe the various measures of the money supply. Money as a medium of exchange: widely accepted in exchange for goods/services, eliminates need for barter/double coincidence of wants, easily recognizable, high value to weight, divisible, durable, difficult to counterfeit. Money as a store of value: means of holding purchasing power over time, must have a stable value. Money as a unit of account: used by people, firms and the government to account for transactions. Metallic money: easily recognized, divided into small units, gresham"s law - bad money drives out good . Paper money: started as deposit slips that could be traded, moved to fractional system, but convertible to valued commodity - gold standard.
