ECON 002 Lecture Notes - Lecture 10: Bank Reserves, Commercial Bank, Money Multiplier
Document Summary
Money, the monetary system, and monetary policy in the short run: Economists believe that in the long run money is neutral because it does not affect real variables such as y. Economists do believe that money can affect nominal variables and real variables in the short run (cid:0) facilitates consumption! Money a non interest bearing asset that is widely used and accepted as a mean of payment: without money, trade would require barter (more inefficient) Can compare a world without money vs. world with money. Every transaction would require a double coincidence of wants the unlikely occurrence that two people each have a good the other wants (not easy to achieve) Can use money as a numeraire good (you can give a price for all goods and services in terms of money) Debt etc. is in terms of currency: store of value an item people can use to transfer purchase power from the present to the future.
