What is NOT Money? - A lot of things you might in everyday life call “money” is NOT money in the eyes of economists
- Income: If someone has a high income (“he earns a lot of money”), you would call this income, not money
- Wealth: If someone has a lot of stocks or bonds, he does not have money in the economic meaning of the term
Types of Money - Commodity money: something that contains intrinsic value and is used in exchange
- Coins made of gold or silver; sometimes cigarettes developed into a medium of exchange in hard times
- To be used as money, a commodity must be generally acceptable, standardized, durable, portable, scarce, and, preferably, easily divisible
- Gold and silver coins inconvenient to carry around in large quantities
- Paper monies were issued representing claims on actual commodities
- Starting in the late 1830s, most European countries had their national currencies by law backed by gold
- Exchange rate between different currencies was computed from their respective value relative to gold, and international transactions were finally settled in gold reserves
- System of gold-backed currencies broke down with the start of World War I
What is the Basis of Value of the Coins and Euro Banknotes we use Today? - The basis of value is—precisely and no more than—the expectation that the euro bill will be acceptable in exchange.
- Fiat money
- A euro bill is money because the government declares it to be money
- Fiat money possesses exchange value
- The value of the goods or services that such money can pay for in the market
Nowadays, You Are Likely to Make Many of Your Transactions by Other Means - Type of money which is purely based on a promise to pay by someone other than the central bank, is called credit money
- Your deposit in a checking account
Do'stlaringiz bilan baham: |
