6. Money
MONEY
• is a special kind of good
• has no inherent value
• is any object generally accepted as payment for
goods and services (historical commodity money)
• has different forms (cash, cashless)
• has different functions
• is an important tool of economic policy
• Historical:
– commodity money
• Current:
– cash – coins and banknotes
– cashless
– deposits in banks
– cheques, cards (credit, debit)
• Medium of exchange
• Measure of value
• Standard of deferred payment
• Store of value
• Quantity of money > quantity of goods = inflation
• Quantity of money = quantity of goods = price
stability (not very common)
• Quantity of money < quantity of goods = deflation
• Coins and Banknotes:
EURO
• Common European
currency