WEEK 1 Flashcards
Any item or commodity that is generally accepted as a means of payment of goods and services.
MONEY
anything good/service can be exchanged by two consenting parties for the acquisition of their desired commodity.
Barter System
4 Functions of Money
Medium of Exchange
Unit of Account
Store of Value
Standard of deferred payment
It is generally acceptable in exchange for goods and services without the need for a barter system.
Medium of Exchange
Serves as the yardstick in measuring the value of commodities in the exchange of process.
Unit of Account
It is durable for exchange later.
Store of Value
It becomes a standard of payments of debts or contracts in which
payments are to be made for the future.
Standard of deferred payment
The Central monetary authority provides monetary policy direction that coversthe areas of money, credit, and banking. It also supervises the operation of banks and regulates the activities of non-bank
financial institutions or intermediaries. Regulates and controls the use of currency.
Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
Three main pillars:
Price Stability
Financial Stability
Efficient payments and settlement systems
refers to the condition of low and stable inflation rate.
Price Stability
make sure bank and nonbank financial institutions follow prudential rules and regulations.
Financial Stability
guarantees that settlement of financial transactions is safe,
timely, and accurate.
Efficient payments and settlement systems
12 Features of Money
- Acceptability
- Stability of Value
- Divisible
- Durability
- Storability
- Cognizable
- Portability
- Uniformity
- Homogenous
- Economical
- Difficult to duplicate
- Malleability
commonly accepted for the sale and purchase of goods and services.
Acceptability
interconvertibility of currency.
Divisible
should not deteriorate abruptly.
Durability
store of value should not depreciate promptly.
Storability
easily recognized.
Cognizable
transportable
Portability
same value for the equal denomination
Uniformity
same quality and quantity
Homogenous
the good money material has economical quality
Economical
applies only to coins wherein can be liquidated or re-coined
Malleability
4 Types of Money
- Currency in Circulation
- Demand Deposits
- Traveler’s Check’
- Other Checkable Deposits
total coins and bills moving in the economy
- Currency in Circulation
bank accounts allow money to be withdrawn from the available balance
- Demand Deposits
medium of exchange utilized as a substitute to hard currency
- Traveler’s Check
access their funds held by writing checks or drafts
- Other Checkable Deposits
refers to the rate of change in the average prices of goods and services typically purchased by consumers.
INFLATION
3 Kinds of Inflation
- Hyperinflation
- Deflation
- Disinflation
high rate of inflation
- Hyperinflation
sustained decrease in the price level
- Deflation
reduction in the rate of inflation
- Disinflation
3 Consequences of Inflation
- Adverse effect on production
- Obstacle to development
- Changes in Relative Prices
2 Measures of Inflation
- Monetary Policy
- Fiscal Policy
refers to the control of monetary authority to the money supply in order to influence the desired level of liquidity in the economy.
- Monetary Policy
refers to government actions that affect the total government spending activities, tax rate or tax revenues, or the government budget deficit.
- Fiscal Policy
3 Causes of Inflation
- Demand-Pull Inflation
- Cost-Push Inflation
- Structural Inflation
sustained rise in the price level caused by an increase in aggregate demand.
- Demand-Pull Inflation
increase in the cost of production that results in a fall in aggregate supply.
- Cost-Push Inflation
excess demand oversupply due to the government’s monetary policy.
- Structural Inflation
Price at which one currency can be exchanged for another.
EXCHANGE RATE
7 Determinants of Exchange Rate
- Differentials in inflation
- Differentials in interest rates
- Current account deficits
- Public Debt
- Terms of trade
- Political Stability
- Economic Performance
3 Exchange Rate Regimes
- Floating
- Fixed
- Managed
currency allowed to move freely up and won according to changes in demand and supply
- Floating
allows the exchanged rate to move within the range of values and permits the rate to fluctuate within the range.
- Fixed
the monetary authority intervenes in the market to smooth out short-run fluctuations without affecting the long-run movement if the exchange rate.
- Managed
