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Chapter 1 Money

Chapter 1 Money. Requirement. 1.grasp (1)function of money (2)the measure of money aggregate (3)evolution of the payment system 2.key points (5)the measure of money aggregate. 3.key terms money commodity money fiat money liquidity M 0 M 1 M 2 M 3 M 4. Think over.

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Chapter 1 Money

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  1. Chapter 1 Money

  2. Requirement • 1.grasp • (1)function of money • (2)the measure of money aggregate • (3)evolution of the payment system • 2.key points • (5)the measure of money aggregate

  3. 3.key terms • money • commodity money • fiat money • liquidity • M0 • M1 • M2 • M3 • M4

  4. Think over • Which of the following belongs to money? • Stock, treasury notes ,treasury bills ,debit card ,alipay, banknotes, deposit in the bank.

  5. Ⅰmeaning and measure of money • 1. MEANING • Money (money supply ) is anything that is generally accepted in payment for goods and services or in the payment of debts . • Currency = money ?

  6. 2.Measure(m0—m4) • liquidity : ease and speed (P51) • M0=currency • M1=currency +checking account deposit+ travel checks • M2=M1+assets with check writing features and other assets with extremely liquidity (saving + small time deposit + short term money market assets)

  7. M3=M2+less liquid assets (large time deposit+ term repurchase agreement+term Eurocurrency + institutional money market mutual fund share) • M4= M3+other short term liquid assets(treasury bills、commercial paper、bank accepted draft、short term corporate bonds 、certificate of life insurance)

  8. Ⅱ Function of money • Case: • In the world war Ⅱ,cigarettes were used as money by prisoners of war in Nazi-era concentration camp. The red cross provided some relief to prisoners of war, but the relief was equal distributed and could not consider personal preference .

  9. In order to facilitate exchange, cigarettes play the role of money, prisoners use cigarettes to mark price and exchange commodities. For example, a sausage worth of 10 cigarettes, a shirt worth of 80 ones, and washing one clothes should pay two cigarettes. Why can cigarettes be used as money by prisoners of war in Nazi-era concentration camp?

  10. 1.medium of exchange • 2.unit of account • 3.store of value

  11. Case study • Characteristics of money • The function of money ( store of value, unit of account and medium of exchange)

  12. Ⅲ Evolution of The Payment System:The Method of Conducting Transactions in The Economy. • 1.commodity money • money made up of precious metal or other valuable commodity

  13. Cowrie money

  14. metallic money

  15. 2.paper money • (1)convertible bank notes • (2)Fiat money • (3)check • (4)electronic means of payment (EMOP) • payment are made by electronic telecommunication.

  16. convertible bank notes

  17. Fiat money

  18. check

  19. 3.electronic money • (1)debit cards • (2)stored value card • (3)electronic cash • (4)electronic checks

  20. Electronic money

  21. Summary • 1.Money (money supply ) is anything that is generally accepted in payment for goods and services or in the payment of debts, which can be measured by M0, M1, M2, M3, M4 according to liquidity. • 2.the functions of money are: medium of exchange, unit of account, store of value. • 3.payment system evolves from commodity money , paper money to electronic money.

  22. Key words and questions • 1.key words • money • commodity money • fiat money • liquidity • M0 • M1 • M2 • M3 • M4

  23. 2.questions • (1)How to measure money supply? • (2)What are the functions of money? • (3)please analyze the evolution of payment system ?

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