Thursday 806

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 10 Money and Prices in the Long Run
Chapter 29 of 36 The Monetary System
Section 3 of 22
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Money is the set of assets in the economy people use to buy goods from each other.
The cash you carry is money because you can directly use it to buy groceries at the market.
If you own shares of Microsoft Corporation, this asset is not a form of money, you cannot buy any consumer product directly with shares of stock, it must be sold first.
Money includes only the few types of wealth regularly accepted by sellers in exchange for goods.
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Money has three functions in the economy
-1- a medium of exchange
-2- a unit of account
-3 - a store of value
These three functions differentiate money from other assets in the economy, such as stocks, bonds, and real estate.
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-1- A Medium of Exchange
A medium of exchange is something buyers give to sellers when they purchase goods.
This transfer of money from buyer to seller allows the transaction.
When you enter a store you are confident the store will accept your money for its goods because money is the accepted medium of exchange.
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-2- A Unit of Account
Unit of account means price, the current value of a good.
When we measure and record economic value, we use money as the unit of account.
Money is the ruler people use to set and post prices, and record debts.
When you go shopping, you might find a shirt costs $20 and a hamburger costs $2.
It would be accurate to say the following
· the price of 1 shirt is 10 hamburgers
· the price of a hamburger is 1/10th of a shirt
If you get¬ a bank loan the size of your loan repayments is measured in dollars
not in a quantity of goods.
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three functions of money
okane no mittsu kinō
お金の三つ機能
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Why is only one common currency, e.g. the U.S. dollar, for the entire world not feasible at this time? ChatGPT:
A single world currency is not currently feasible because national economies differ greatly in inflation, productivity, unemployment, debt, and economic growth.
Each country often needs its own interest-rate and exchange-rate policies.
A policy appropriate for a rapidly growing economy could worsen unemployment in a country already in recession.
Giving up a national currency would therefore mean surrendering an important method of responding to local economic problems.
A successful common currency also requires strong political and financial institutions.
The world has no unified central bank, tax system, government budget, banking regulator, or accepted system for transferring money from prosperous regions to regions in crisis.
Using the U.S. dollar worldwide would additionally place monetary authority largely in the hands of the United States, which other governments would be unlikely to accept.
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Why does one common currency work well for the 50 U.S. states? CGPT:
One common currency works well for the 50 states because they share a federal government, central bank, banking system, laws, national market, and federal tax-and-spending system.
Workers and businesses can move relatively freely between states, while federal programs such as Social Security, unemployment assistance, and disaster aid automatically transfer resources toward states experiencing economic weakness.
Although Federal Reserve policy may not perfectly suit every state at every moment, these political, financial, and labor-market connections help states adjust without needing separate currencies or exchange rates.