term1 Definition1term2 Definition2term3 Definition3
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What is money?
A form of asset that is used as a medium of exchange, as a unit of account and a store of value.
M3 is comprised of
Currency (coins and notes), current deposits (cheque accounts) and non-current deposits (savings).
Currency is a form of token money which is
Money for which the intrinsic value of the commodity used to hold the monetary unit is less than the recorded value of the money
Broad money refers to
M3 plus the borrowings from non bank financials less the currency and bank holdings of these firms
Credit cards are
Not money, and are just a simple method of obtaining short term loans
M0, the monetary base, is composed of
Currency in public and banks plus the banks demand deposits with the RBA
The two components of the demand for money are
The transactions demand and the assets demand for money
The transactions demand for money is
THe demand for money as a medium of exchange, and depends on money GDP. Is vertical
The assets demand for money is
The demand for money as a financial asset and store of wealth, which depends on interest rates and is downward sloping
The asset demand for money is downward sloping
due to the opportunity cost of forgone interest payments when holding wealth as cash when interest rates are high as opposed to interest bearing assets
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