ECON 1BB3 Chapter Notes - Chapter 10-13: Nominal Interest Rate, Real Interest Rate, Seigniorage
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ECON 1BB3 Full Course Notes
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If did not have money would have to barter. Double coincidence of wants: unlikely for two people to each have a good/services that the other wants. Money: set of assets in an economy that people regularly use to buy goods/services from other people. Money only includes wealth that is accepted by sellers in exchange for goods/services. Liquidity: ease with which an asset can be converted into the economy"s medium of exchange. Stocks and bond can be sold easily so relatively liquid. Things that require more time/effort to sell are less liquid. Commodity money: money that takes the form of a commodity with intrinsic value (ex. gold, cigarettes) Intrinsic value: item would have value even if were not used as money. Fiat money: money without intrinsic value that is used as money because of government decree. Government must establish what can be accepted as money.