EC223 Lecture Notes - Lecture 5: Transaction Cost, Bitcoin, Hyperinflation
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Be easily standardized: be widely accepted, be divisible, be able to carry, not deteriorate quickly. If there were 10 goods, we would need to know 45 prices, while if there were 100 goods, we would need to know 4950 prices. N goods= n[(n 1)/2: using money as a unit of account reduces the number of prices. Argentina: currency, commodity money: precious metals or other valuable commodities, capital cattle, salary salt, problems: hard to transport, indivisible, easily perished. It takes time to get cheques from one place to another- serious pro(cid:271)le(cid:373) if (cid:455)ou(cid:859)re pa(cid:455)i(cid:374)g so(cid:373)eo(cid:374)e i(cid:374) a differe(cid:374)t lo(cid:272)atio(cid:374) (cid:449)ho (cid:374)eeds to be paid quickly. Paypal: bitcoin, advantages, serves as a medium of exchange; lower transaction costs and increased privacy, disadvantages, no unit of account or store of value- sizeable volatility of the price of. Bitcoins: uncertain security from theft and fraud- mt. M = x1 + x2 + + xn ,