chapter 3 What Is Money?

Joe is rich –he has an awful lot of money. Meaning of Money Your money or your life? Joe is rich –he has an awful lot of money. Sheila would be a wonderful catch; she has a good job and earns a lot of money.

Meaning and Function of Money Economist’s Meaning of Money 1. Anything that is generally accepted in payment for goods and services Not the same as wealth or income wealth----the total collection of pieces of property that serve to store value income---- a flow of earnings per unit of time Functions of Money 1. Medium of exchange 2. Unit of account 3. Store of value Evolution of Payments System 1. Precious metals like gold and silver 2. Paper currency 3. Checks 4. Electronic means of payment: Fedwire, CHIPS, SWIFT, ACH 5. Electronic money: Debit cards, Stored-value cards, Electronic cash and checks

战俘营里的货币 二战期间，在纳粹的战俘营中流通着一种特殊的商品货币：香烟。当时的红十字会设法向战俘营提供了各种人道主义物品，如食物、衣服、香烟等。由于数量有限，这些物品只能根据某种平均主义的原则在战俘之间进行分配，而无法估计到每个战俘的特定偏好。但是人与人之间的偏好显然是会有所不同的，有人喜欢巧克力，有人喜欢奶酪，还有人则可能更想得到一包香烟。因此这种分配显然是缺乏效率的，战俘们有进行交换的需要。 但是即便是在战俘营这样一个狭小的范围内，物物交换也显得非常不方便，因为它要求交易双方恰巧都想要对方的东西，也就是所谓的需求的双重巧合。为了使交换能够更加顺利地进行，需要有一种充当交易媒介的商品，即货币。那么，在战俘营中，究竟哪一种物品适合做交易媒介呢？许多战俘不约而同地选择香烟来扮演这一角色。 战俘们用香烟来进行计价和交易，如一根香肠值10根香烟，一件衬衣值80根香烟，替别人洗一件衣服则可换得两根香烟。有了这样一种记账单位和交易媒介之后，战俘之间的交换就方便多了。 香烟之所以会成为战俘营中流行的“货币”，是和它自身的特点分不开的。它容易标准化，而且具有可分性，同时也不易变质。这些正是和作为“货币”的要求相一致的。当然，并不是所有的战俘都吸烟，但是，只要香烟成了一种通用的交易媒介，用它可以换得到自己想要的东西，自己不吸烟又有什么关系呢？我们现在愿意接受别人付给我们的钞票，也不是因为我们对这些钞票本身有什么偏好，而仅仅是因为我们相信，当我们用它来买东西，别人也愿意接受。 What kind of material can be used as money?

Criteria of commodity function as Money 1. It must be easily standardized 2. It must be widely accepted 3. It must be divisible 4. It must be easy to carry 5. It must not deteriorate quickly

Birth of the Euro: Will It Benefit Europe?

Federal Reserve’s Monetary Aggregates

Growth Rates of Fed’s Monetary Aggregates

How Reliable are the M2 Money Data: Data Revisions

Practices 1.Which of the following three expressions uses the economists’ definition of money? a. “How much money did you earn last week?” b. “When I go to the store, I always make sure that I have enough money.” c. “The love of money is the root of all evil.”

2. Why people in the United States in the nineteenth century sometimes willing to be paid by check rather than with gold, even though they knew that there was a possibility that eh check might bounce? 3. Rank the following assets from most liquid to less liquid: A. Checking account deposits B. Houses C. Currency D. Washing machines E. Savings deposits F. Common stock

4.Why have some economists described money during a hyperinflation as a “hot potato” that is quickly passed from one person to another?