TAILIEUCHUNG - Lecture Principles of economics - Chapter 10: The monetary system

This chapter examines how the financial system works. First, we discuss the large variety of institutions that make up the financial system in our economy. Second, we discuss the relationship between the financial system and some key macroeconomic variables notably saving and investment. Third, we develop a model of the supply and demand for funds in financial markets. | 10 MONEY AND PRICES IN THE LONG RUN 29 The Monetary System THE MEANING OF MONEY Money is the set of assets in an economy that people regularly use to buy goods and services from other people. The Functions of Money Money has three functions in the economy: Medium of exchange Unit of account Store of value The Functions of Money Medium of Exchange A medium of exchange is an item that buyers give to sellers when they want to purchase goods and services. A medium of exchange is anything that is readily acceptable as payment. The Functions of Money Unit of Account A unit of account is the yardstick people use to post prices and record debts. Store of Value A store of value is an item that people can use to transfer purchasing power from the present to the future. The Functions of Money Liquidity Liquidity is the ease with which an asset can be converted into the economy’s medium of exchange. The Kinds of Money Commodity money takes the form of a commodity with intrinsic value. Examples: .

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• Principles of economics
• Lecture Principles of economics
• Monetary system
• Functions of money
• Federal reserve
• Central bank
• Ten principles of economics
• People face tradeoffs
• Opportunity cost
• Marginal changes
• Economics of information
• Consumer choice
• Free rider problem
• Market transactions
• Welfare Economics
• Consumer surplus
• Demand curve
• Efficiency of markets
• Nature of an externality
• Market inefficiency
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• Principles of microeconomics
• Lecture Principles of microeconomics
• Scarce resources
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• Choice implies cost
• Principles of agricultural economics
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• Theory of consumer behaviour
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• Thinking like an economist
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• Price elasticity of demand
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• Stabilize the economy
• Monetary policy