Week 7 - The Meaning & Functions of Money
- Definitions of money - narrow, broad
- Function of money, ESU
- The role of the financial sector - expert advice, channeling funds, maturity transformation, risk transformation
- Attributes of money
- Created by: Preeya
- Created on: 23-03-13 09:26
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- The Meaning & Functions of Money
- Functions (ESU)
- Medium of Exchange: Buying and selling goods, services and assets
- Barter economy- goods and services exchanged for other goods and services.
- A means of storing wealth
- Means of establishing value of future claims and payments (unit of count): e.g. workers & managers establish wage rates. Counting in the same units = efficient.
- Medium of Exchange: Buying and selling goods, services and assets
- Definitions of money
- Narrow Money
- Cash + Current Accounts
- Broad Money (DSA)
- Deposit & Savings Accounts
- Narrow Money
- Ideal attributes of money
- durability
- divisibility
- transportability
- non-counterfeitability
- The role of the financial sector - Financial Intermediaries
- expert advice
- The financial sector- Raises efficiency of Y. If national economy develops so should the financial sector
- Channeling funds
- Maturity transformation
- The transformation of deposits into loans for a longer maturity period.
- Risk transformation
- The process whereby banks can spread the risks of lending by having a large no. of borrowers.
- Banks lend to lots of customers. Can therefore absorb the loss of the odd default because of the interest they earn on other loans.
- The process whereby banks can spread the risks of lending by having a large no. of borrowers.
- Functions (ESU)
- non-counterfeitability
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