The role and uses of money in the economy, and monetary theory Flashcards
puro what is money pati may onting tao
is any item or commodity that is generally accepted as a means of payment for goods and services.
Money
is accepted as means of Repayment of debt.
Money
eliminates the problems that arises in Bartering.
Money
includes the funds stored as electronic entries in one’s checking account and savings account.
Money
is the oil that keeps the machinery of our world turning
Money
The ______was first observed around 10,000 – 3000 BCE
BARTER
It is the oldest form of payment to exchange of goods and services.
BARTER SYSTEM
Exchange of Goods and Services are executed based on perceived equal value
BARTER SYSTEM
The barter observes the______concept.
IOU
CHARACTERISTICS AND KEY FUNCTIONS OF MONEY
*Medium of exchange
*Store of value
*Unit of account
* Standard deferred payment
MONEY MUST NOT BE PERISHABLE
STORE OF VALUE
CONTAINS AN INTRINSIC VALUE, SUCH AS THAT OF A PRECIOUS METAL THAT WAS USED TO MAKE A COIN. HENCE, IT WILL ACT AS A GUARANTEE OF ACCEPTANCE TO PAY FOR TRANSACTIONS.
ITEM OF WORTH
MUST BE FREELY AND WIDELY USED FOR EXCHANGE OF GOODS AND SERVICES, AND THERE MUST BE STABILITY TO THE MONEY BEING USED.
MEANS OF EXCHANGE
SHOULD EASILY BE DIVISIBLE AND THERE ARE SUFFICIENT DENOMINATIONS.
MEANS OF EXCHANGE
MONEY MUST BE USED TO RECORD WEALTH POSSESSED, TRADE, OR SPENT PERSONALLY OR NATIONALLY.
UNIT OF ACCOUNT
Money must only be issued and recognized by one authorized government body, otherwise, trust in its value would disappear.
UNIT OF ACCOUNT
MONEY MUST BE WIDELY ACCEPTED TO VALUE A DEBT THEREBY ALLOWING GOOD AND SERVICES TO BE ACQUIRED NOW AND PAID FOR IN THE FUTURE.
STANDARD OF DEFERRED PAYMENT
AN IDEA WHICH STATED THAT A CHANGE IN MONEY SUPPLY IS A KEY DRIVER OF ECONOMIC ACTIVITY
MONETARY THEORY
Insufficient money circulating in the economy will slow it down
MONETARY THEORY
Surplus of money circulating in the economy can cause inflation due to higher price levels
MONETARY THEORY
MONETARY THEORY FORMULA
MV= PQ
what is the meaning of M in the monetary theory formula?
M = Money Supply
what is the meaning of V in the monetary theory formula?
V = Velocity (number of times currency is spent in a year)
what is the meaning of P in the monetary theory formula?
P = Price of Goods and Services
what is the meaning of Q in the monetary theory formula?
Q = Number of Good and Services
PRICE LEVELS TENDS TO RISE MORE THAN THE PRODUCTION OF GOODS AND SERVICES WHEN THE ECONOMY IS CLOSE TO FULL EMPLOYMENT.
FULL EMPLOYMENT
happens when all available labor resources are being used in the most efficient way possible.
FULL EMPLOYMENT
IT DOES NOT MEAN ALL ARE EMPLOYED WITHIN THE ECONOMY
FULL EMPLOYMENT