復習下學期華僑學院

1、Chapter 3What Is Money?Meaning of MoneyWhat is it?Money (or the “money supply”): anything that is generally accepted in payment for goods or services or in the repayment of debts. A rather broad definitionMeaning of MoneyMoney (a stock concept) is different from:Wealth: the total collection of piece

2、s of property that serve to store value e: flow of earnings per unit of time (a flow concept) Functions of MoneyMedium of Exchange: Eliminates the trouble of finding a double coincidence of needs (reduces transaction costs)Promotes specializationA medium of exchange mustbe easily standardizedbe wide

3、ly acceptedbe divisiblebe easy to carrynot deteriorate quicklyFunctions of MoneyUnit of Account: used to measure value in the economyreduces transaction costsStore of Value: used to save purchasing power over time.other assets also serve this function Money is the most liquid of all assets but loses

4、 value during inflationEvolution of the Payments SystemCommodity Money: valuable, easily standardized and divisible commodities (e.g. precious metals, cigarettes).Fiat Money: paper money decreed by governments as legal tender.Evolution of the Payments SystemChecks: an instruction to your bank to tra

5、nsfer money from your accountElectronic Payment (e.g. online bill pay).E-Money (electronic money):Debit cardStored-value card (smart card)E-cash Measuring MoneyHow do we measure money? Which particular assets can be called “money”?Construct monetary aggregates using the concept of liquidity:M1 (most

6、 liquid assets) = currency + travelers checks + demand deposits + other checkable deposits. Measuring MoneyM2 (adds to M1 other assets that are not so liquid) = M1 + small denomination time deposits + savings deposits and money market deposit accounts + money market mutual fund shares. Table 1 Measu

7、res of the Monetary AggregatesMonetary AggregatesCurrencyTravelers ChecksDemand DepositsOther Check. DepM1 (4)M2 (4+3)M3 (4+3+4)Small Den. Dep.Savings and MMMoney Market Mutual Funds SharesM1 vs. M2Does it matter which measure of money is considered?M1 and M2 can move in different directions in the

8、short run (see figure). Conclusion: the choice of monetary aggregate is important for policymakers. FIGURE 1 Growth Rates of the M1 and M2 Aggregates, 19602008Sources: Federal Reserve Bulletin, p. A4, Table 1.10, various issues; Citibase databank; .How Reliable are the Money Data?Revisions are issued because:Small depository institutions report infrequentlyAdjustments must be made for seasonal variationWe probably should not pay much attention to short-run movements in the money supply numbers, but should