Friday, April 17, 2009

the demand for money and the quantity theory(1)

what are functions of money ? Here are some just discussed and some new ones:
1- Money is medium of exchange enabling us to transact our national income and product without recourse to hopelessly inefficient barter .
2- money is the unit of account in which we express prices for current transactions and also for future or deferred transaction (such as when I borrow $1000 today and agree to pay back $1200 tree years from now).
3- money is a safe way of holding at least part of one is wealth- safe against the ups and downs inherent in stocks, land , homes , and bonds . when all these are going down in price , the canny hoarder of money is the most successful speculator in the community. (when prices rise , however ,many money holders suffer.)
4- money holding is necessary precaution against having a sudden expense occur or an unexpected delay in a receipt due from someone else. Similarly , it helps one take advantage of a bargain in goods or in securities that might suddenly come up .

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