EC140 Lecture Notes - Lecture 11: Fiat Money, Money Supply, Federal Reserve System
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EC140 Full Course Notes
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Document Summary
The large element of money supply in canada is . Widely accepted in exchange for goods/services: pennies are not acceptable anymore. Eliminates need for barter/double coincidence of wants. Easily recognizable, high value to weight, divisible, durable, difficult to counterfeit: must be physically durable. Means of holding purchasing power over time. Must have a stable value (be able to hold its balance durable) Inflation changes the amount of money: employees get paid less during the lunch hour therefore they insist on being able to go out and buy their lunch while still being paid. Used by people, firms and the government to account for transactions. Gresham"s law bad money drives out good : if money can be debased, it will make the coin worth less. Easier to debase metallic money than paper money. Started as deposit slips that could be traded. Moved to fractional system, but convertible to valued commodity - gold standard.