My Notes

Unit 3
The Monetary Sector

Objectives

?Define money and explain the requirements of money
? detect the functions of money
?Discuss the functions of a central bank and commercial banks
? take in the money creation process
?Explain how the supply of money and the subscribe for money are determined
?explain the instruments of monetary policy


Definition of coin

Money is anything that is generally acceptable in exchange for goods and go.


patronage Economies

Barter is the direct exchange of one good for a nonher without development money as ordinary of exchange.

If people want to trade, thither has to be a double coincidence of wants.

This means on that point is a need to find a match amidst what each of the two traders wants to obtain and what each wants to offer in exchange.

Barter is a time consuming process and not suitable for a modern economy where a big range of goods and services are produced.


Requirements of Money

Objects that we can use as money should meet the following requirements:

?General acceptability: It should be desired and accepted by all as medium of exchange.

?Durability: Money changes hands all the time and and then it should not wear easily.

?Manageability: Its mass should be delicate relative to its rank, i.e. it must be portable.





?Homogeneity and divisibility: The various denominations of a currency should be made of the same material and grammatical construction the same.

?Recognisability: It should be easily recognizable and distinguishable from other materials.

? apprize: It should be limited in supply because the relative scarcity of a currency determines its value.

?A relatively fixed value: Its value should be fairly constant. Money loses its value and get power due to inflation.


Functions of Money

Money has several basic functions in the economy. These functions distinguish money from other assets such as stocks and bonds.

? specialty of exchange: We offer money in exchange for goods and services and it makes this exchange...If you want to get a full essay, order it on our website: Orderessay



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