Chapter 2 Money

CONTENS 2.1 Characteristics of Money 2.2 Evolution of the Payments System 2.3 The Future of Money 2.4 Measuring Money

2.1 Characteristics of Money Money is an asset that is generally accepted as payment for goods and services or repayment of debt.

Characteristics of Money 1. A means of payment. 2. A unit of Account 3. A Store of Value

2.2 The Payments System 1. Types of Money Commodity Money – Things that have intrinsic value Fiat Money – Value comes from government decree (or fiat)

The Payments System 2. Checks Instructions to the bank to take funds from your account and transfer those funds to the person or firm whose name is written in the “Pay to the Order of” line.

The Path of a Paper Check

The Payments System 3.Other Forms of Payments Credit Cards Debit Cards Electronic Funds transfers Stored Value Cards

2.3 Future of Money Electronic money? Paperless money?

Liquidity Liquidity a measure of the ease an asset can be turned into a means of payment (Money).

2.4 Measuring Money Different Definitions of money based upon degree of liquidity. Federal Reserve System defines monetary aggregates.

1. Monetary Aggregates Link to Current Data

Measuring Money Different Definitions of money based upon degree of liquidity. Federal Reserve System defines monetary aggregates.

Measuring Money 流动性是各国划分货币供给层次的主要依据. M1 ，M2，M3 We compute several measures of money called the monetary aggregates: M1, M2, M3 and so forth. 流动性是各国划分货币供给层次的主要依据.

Measuring Money In China： M0＝流通现金 狭义M１＝ M0+可开支票的存款 In Usa： M1,M2,M3,L

M1 is the narrowest definition of money，and reflect the direct purchasing power. M2 is the most commonly quoted monetary aggregate，and reflect the potential purchasing power. 广义货币M2，反映潜在购买能力

1994-2002年中国各层次货币供给统计 单位:亿元

Monetary Aggregates Link to Current Data

Growth Rates in Monetary Aggregates

Money and Inflation 1990-2000 1960-1980 M2 Growth Rate and CPI Inflation Rate 2 years later.

Measures of Inflation Fixed-weight Index - CPI Deflator – GDP or Personal Consumption Expenditure Deflator Chain-weight index – Half way between fixed-weight and a deflator.

Chapter 2 End of Chapter