functions and types: money

Question 1

wealth

Answer 1

to have money

Question 2

income

Answer 2

to make money

Question 3

what is the difference between wealth and money

Answer 3

asset rich, cash poor: have majority of your cash invested

Question 4

store of value

Answer 4

purchasing power

Question 5

medium of exchange

Answer 5

accepted at stores

Question 6

medium of exchange

Answer 6

accepted at stores

Question 7

unit of account

Answer 7

price donomination

Question 8

standard of deferred payment

Answer 8

debt denomination

Question 9

why does USD fulfills good SOV

Answer 9

because it is a good currency more short run

Question 10

example of not good SOV

Answer 10

holding onto cash for long time

Question 11

SOV requires money to not

Answer 11

deteriorate

Question 12

what is most important money function

Answer 12

MOE

Question 13

MOE typically requires money to be

Answer 13

easy to carry, divisible, and easily standardized

Question 14

is USD widely accepted as a means of payment

Answer 14

-more so using electronic system than cards because modernizing
-ther nations will use USD as means of payment

Question 15

UOA

Answer 15

since modern economies only have one UOA this function normally reveals which asset serves as money

Question 16

SDP

Answer 16

where money value comes from
-can use these assets to pay your debts

Question 17

which of the four functions of money is drecitly undermined by rapid rates of inflation

Answer 17

SOV

Question 18

in what sense might such money turn into hot poatato

Answer 18

spend ASAP like hot potato

Question 19

are there any other functions also undermined indirectly? in particular what might you expect to happen after a currency turns into a hot potato

Answer 19

if you are a business in this situation is you will start accepting any form of money (like other nations money with better value or bitcoin

Question 20

the dollar (MOE) eliminates what and promotes what

Answer 20

elimainates double coincadence of wants transaction req and thus promotes specialization

Question 21

doubke coincadence of wants

Answer 21

suppose peopple specialize even in absence of a common MOE (with skills and prefrences)

Question 22

problem of double coincadnece of wants

Answer 22

multilateral problem

Question 23

optimistic

Answer 23

makret that requires investment of time and place to trace (money makes it easier to just sell these goods)

Question 24

when is an asset said to be money

Answer 24

if it serves as a SOV, MOE, UOA and SDP

Question 25

whe is money said to be commodity money

Answer 25

if it assumes form of a physical commodity (eg gold)

Question 26

when is money said to be fiat

Answer 26

if it is created artifically

Question 27

fiat money is said to be what when it is exchangable for a physical commodity at a fixed exchnage rate (eg gold standard)

Answer 27

commodity backed

Question 28

evolution from commodity to fiat

Answer 28

-for sake of trade (easier to use)
-natural evolution from gold ->cash
-worried because paper isgnifies how much gold so need chance to exchange it

Question 29

what can govn’t do to alleviate concerns commodity backed fiat

Answer 29

they will issue insurance money to ppl who deposit money in banks. Banks can get checked by govn’t (to help ppl trust banks)

Question 30

why might the govnt prefer fiat that is niether measured nor backed by gold

Answer 30

govnt wants to stop conversion of paper money -> gold because history shows that gold is finite paper isn’t (constraintst from commodity backed fiat made it collapse)

Question 31

what is USD backed by

Answer 31

itself

Question 32

dollars in real economy

Answer 32

-currency in circulation (FED does not issue currency to HH directly)
-bank deposits (+simialr)

Question 33

dollars in banking system

Answer 33

-valut cash held by bank with Fed (physical equivalence)
-bank reserves (only nonbank with access to reserves is treasury)

Question 34

bank deposit

Answer 34

electronic money banks have with federal reserve

Question 35

only way for fed to make money

Answer 35

is in banking system

Question 36

why are we not just counting currency in circulation when looking at aggreagtes

Answer 36

The different types of currency and exchange!!

Question 37

rank varying monetary aggregates according to MOE function

Answer 37

most widely acceored is demand deposit (debit) because immediatley avilaable and little risk. If you dont have money and use debit card it will decline. drawback to demand depsoit is that there is typically a fee so might prefer cash because no fee (currency in circulation). 3rd is credit card (limit factor = because of high fees). 5th is vault cash. cant leave bank so it is unusable. 4th is checks because it can bounce if you dont have enough money

Question 38

when is an asset said to be money

Answer 38

if it is SOV, MOE, UOA, SDP

Question 39

following a positive permamnet shock to AS what happens to economy

Answer 39

downward price pressure

Question 40

given it is a mandate to keep prices stable, what should the FEd do following depicted shock

Answer 40

lower interest rate: expansionary monetary policy

Question 41

to avoid deflation money supply must

Answer 41

rise alongside RGDP

Question 42

to reduce inflation money supply must

Answer 42

rise faster than RGDP