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1、1,Chapter One Money&Monetary System,2,Sketch of Chapter One,S.1.Overview of Money,S.2.Functions of Money,S.3.Forms of money,Meaning of money,S.4.Monetary system,Standard of value,Means of exchange,Means of store,Means of payment,Commodity money,Representative money,Credit money,Electronic money,Exte
2、nsion of money,Narrow money,Broad money,Basic elements of monetary system,Types of monetary system,Metallic standard,Credit money standard,Chinas monetary System,Emergence of money,Money and economy,3,1.1.Meaning of money Money is anything that can be generally accepted in payment for goods and serv
3、ices or in the repayment of debts.There is difference between the two terms:currency and money Money=Currency+deposits,S.1.Overview of Money,4,S.1.Overview of Money 1.1.Meaning of money,wealth-money Wealth includes not only money,but also other assets,such as bonds,stocks,art,land,cars,houses,etc.in
4、come-money Income is a flow of earnings per unit of time.Money is a stock.It is a certain amount at a given point in time.,5,S.1.Overview of Money 1.2.Emergence of money,Money is the product of development of commodity exchange.1,Direct exchange-barter Double coincidence of wants(双边一致的交易需求)It refers
5、 to the case in which the want of either side should be coincided with that of the other side in commodity exchange.2,Indirect exchange,6,S.2.Functions of Money,Standard of value Means of exchange Store of value Means of payment World money,7,S.2.Functions of Money,Standard of value 1.When money fun
6、ctions as standard of value,It is abstract.It should be carried out through price standard.2.Price is the expression of value of goods in units of money and affected by three factors:the value of goods,the quantity of money and the value of money-purchasing power:P=1/pp,8,S.2.Functions of Money,Purc
7、hasing power:PP refers to the amounts or numbers of commodities or services each unit of currency can purchase.,9,S.2.Functions of Money,Means of exchange The formula of the law of money circulation:M=PQ/V M:Necessary quantity of money as means of exchange.P:Price level.Q:quantity of goods and servi
8、ces V:Velocity of money(the average number of times per year that the money is used in making payment for final goods and services.,10,S.2.Functions of Money,Means of exchange1,Commodity circulation:It refers to the continuous commodity exchange with money used as medium.2,Money circulation:It refer
9、s to the movement of money as means of exchange shifting from buyers to sellers in commodity circulation.3,The relation between C.C and M.C.M.C.is caused by C.C.Without C.C.there would be no M.C.which should meet the objective demand of C.C.M.C.serves C.C.and is the expression of C.C.,11,Store of va
10、lue 1.Money can function as store of value well only when its value or pp is stable.2.Its the liquidity that makes people hold money as store of value even if money is not the most attractive one.Liquidity:refers to the easiness and speed that assets can be converted into cash at the lowest cost.,S.
11、2.Functions of Money,12,Means of payment Money plays the function of means of payment in the unilateral transfer which refers to the transfer of money without any equivalent good or service accompanying.1,It is directly related to commodity exchange.When goods are sold or bought on credit money will
12、 be paid afterwards.2,It has gone beyond commodity exchange in such payment as credit payment,tax payment,donation,war indemnity,wages,etc.,S.2.Functions of Money,13,S.2.Functions of Money,World money Its only the extension of the functions of money beyond a national boundary.,14,S.2.Functions of Mo
13、ney,Standard of value-Unit of accountMeans of exchange-Medium of exchangeStore of value-Store of valueMeans of payment-Standard of deferred payment,15,S.3.Development of money 3.1.Forms of money,Commodity money-Metal money Representative money Credit moneyElectronic money,16,S.3.Development of money
14、 3.1.Forms of money,Commodity money-Metal money Full-bodied money It refers to the precious metal coins that contain the same value in metal as their face value.,17,S.3.Development of money 3.1.Forms of money,Credit money Its a kind of credit certificate that serves as means of exchange and means of
15、 payment.The features of credit money 1)It shows the relationship of credit.2)Money is put into circulation through businesses of financial institutions;3)It has no relation with gold and its issuance is backed by reserves,including foreign exchange and securities.,18,S.3.Development of money 3.1.Fo
16、rms of money,Electronic money It refers to depository money stored and processed through computer system,such as Electronic Funds Transfer System(EFTs).It usually takes two forms:one is various plastic cards,such as credit cards,debit card;the other is bank accounts on internet.,19,S.3.Development o
17、f money 3.2.Extension of money,1,The general measure of money The narrow money:M0 and M1 M0:the cash or currency in circulation M1=Mo+Dd,The broad money:M2&M3 M2=M1+Ds+Dt M3=M2+other assets(such as T-bills,commercial paper,etc.)quasi-money or near-money,20,Dd:These deposits may be withdrawn on deman
18、d.The depositor usually utilizes a check to request the bank to make payment.So it is also called checkable deposits.Ds:Such deposits have no check-writing privileges,may be withdrawn on demand and pay interest.They are symbolized by a little passbook in which transactions and accrued interests are
19、recorded.Dt:Such deposits have legal maturity date and cannot be transferred to others by writing checks.They can not be drawn before the maturity date,if so,there will be interest penalty on it.As they are less liquid and less likely to be withdrawn than savings deposits,banks pay a higher interest
20、 rate on them.,21,S.3.Development of money 3.2.Extension of money,2.How is money measured?1)The foundation of measurement of money is their liquidity.M1M2 and M3 are arranged in the descending order of liquidity Cash Dd Ds Dt Bonds Stock Real estate 2)Whether money has direct purchasing power is the
21、 boundary of the narrow and broad money.,22,S.3.Development of money 3.2.Extension of money,3,The meanings for different measures of money:First,to find the correlation between each measure and economic activities.Second,to monitor the operation of macro-economy and conduct monetary policy through r
22、egulating different measures of money.,S.3.Development of money 3.2.Extension of money 4,Money measures of different countries 1)Measures of money in the US,24,Money Market Deposit Account(MMDA 货币市场存款帐户)is an account that combines savings and investment and provide check-writing privileges,and can t
23、herefore be used for transaction purpose.Money Market Fund Shares(MMMF货币市场基金)absorb small amounts of funds from the public by issuing fund shares and then invest funds collected mainly in short-term securities in the money market.The holders of fund shares can not only get returns from investing in
24、funds,but also are able to write checks against their shares.,25,S.3.Development of money 3.2.Extension of money 4,Money measures of different countries,2)Measures of money in the UK M1=Currency+Pound demand deposits held by the private sector M2=Currency+Small Pound demand deposits held by the priv
25、ate sector and other deposits M3 of Pound=M1+Pound time deposits held by the private sector+Pound deposits by the public sector M3=M3 of Pound+other currency deposits held by British residents,26,S.3.Development of money 3.2.Extension of money 4,Money measures of different countries,2)Measures of mo
26、ney in the UK PSL1=M3 of Pound held by the private sector+Treasury bills held by individuals+Deposits held by individuals in local financial institutions+bankers Acceptance.PSL2=PSL1+various liquid assets including National savings bonds+deposits held by private sector with building society and nati
27、onal savings banks,27,S.3.Development of money 3.2.Extension of money,3)Chinas measures of money M0=Currency in circulationM1=M0+Dd M2=M1+household deposits+time deposits of enterprises and institutions+trust deposits+foreign currency deposits+shareholders margin accounts M3=M2+financial bonds+comme
28、rcial paper+negotiable CDs+other assets,28,S.4.Types of Monetary System,4.1.Basic elements of monetary system1,Determination of money materials and units.2,Capacity of money for payment.3,Regulation of coinage and issuance of standard money.4,System of reserves.,29,4.2.Types of monetary system,The S
29、ilver Standard,The Bimetallic Standard The Metallic Standard,The Gold Standard The Gold Exchange Standard,The Gold Coin Standard,The Gold Bullion Standard,The Credit Money Standard,Monetary standard,Parallel Standard,Double Standard,Lame Standard,30,4.2.Types of monetary system 1,The Metallic Standa
30、rd,1)The Silver Standard It was based on silver and silver coins was the standard money and could be minted and imported and exported freely.Shortcomings:the value of silver was low,the price of silver was not stable and silver was in short supply.,31,4.2.Types of monetary system 1,The Metallic Stan
31、dard,2)The bimetallic Standard(16th-18th)It was the monetary system based on both gold and silver.It includes Parallel Standard,Double Standard and Lame Standard.,32,4.2.Types of monetary system 1,The Metallic Standard,1)Bimetallic Standard(1)Parallel Standard It refers to the monetary system under
32、which gold and silver coins circulated according to their real value respectively.The disadvantage of it was that a commodity had dual prices in terms of gold coins and silver coins.The ratio of dual prices of commodities often fluctuated with changes of market prices of both gold and silver.,33,4.2
33、.Types of monetary system 1,The Metallic Standard,1)Bimetallic Standard(2)Double Standard Under the system gold coins and silver coins circulated according to the ratio between the two metals stipulated by government laws.The advantage was the ratio of the two was not subject to market fluctuation o
34、f prices of both gold and silver.The disadvantage was there existed Grahams Law that bad money drove good money out of circulation when market prices of both gold and silver deviated from the official ratio between the two metals.,34,4.2.Types of monetary system 1,The Metallic Standard,1)The Bimetal
35、lic Standard(3)The Lame Standard Under the system both gold coins and silver coins were standard money,but not on the equal footing.Only gold coins could be minted freely while silver coins could not,there was a restriction of amounts on silver coins in payment each time and silver coins became mino
36、r coins.,35,4.2.Types of monetary system 1,The Metallic Standard,2)The Gold Standard(1)The Gold Coin Standard It was a system based on gold.The basic features of it is as follows:A.Gold coins that were stipulated certain weight and fineness of gold was standard money in circulation.B.Gold coins coul
37、d be minted freely.C.Gold and gold coins could be imported or exported freely.D.Bank notes could be converted into gold or gold coins freely.,36,4.2.Types of monetary system 1,The Metallic Standard,2)The Gold Standard(2)The Gold Bullion Standard The basic feature of it were:bank notes that had certa
38、in gold content set by the law circulated and could only be converted into gold bullion under certain condition.,37,4.2.Types of monetary system 1,The Metallic Standard,2)The Gold Standard(3)The Gold Exchange Standard Under the system bank notes could be exchange for foreign exchange that could be c
39、onverted into gold.The basic feature of it were:the bank notes of the country under the Gold Exchange System circulated and peg to the currency of another country adopting the Gold Coin Standard or the Gold Bullion Standard.,38,4.2.Types of monetary system 2,Inconvertible Credit Money Standard,It is
40、 a system based on inconvertible credit money.The features of it are:First,Money is all credit money composed of cash and deposits which embody a relation of credit.Second,Credit money has no relation with gold and cant be converted into gold.Third,Credit money is put into circulation all through fi
41、nancial institutions businesses.Fourth,National government maintain a stable money circulation through regulating and controlling money supply,further macro economy.,39,4.2.Types of monetary system 3,Chinas Monetary System 1,RMB is the sole legal tender or standard money on the mainland of China 2,R
42、MB is an inconvertible money and is independent money.3,RMB is composted of currency and bank deposits.The issuance of RMB is centralized with the PBC and depository money is put into circulation though banking businesses.4.In China we have special monetary system“one country,two systems”.,40,Summar
43、y 1,Money has four main functions:standard of value,means of exchange,store of value,means of payment.2,In history there have appeared various kinds of money,such as commodity money,representative money,credit money and electronic money.3,Money supply refers to the collection of all kinds of money i
44、n an economy:currency,deposits and other assets.4,Most countries in the world have undergone roughly the silver system,the bimetallic system,the gold system and the present inconvertible credit money system.,41,ReviewKey conceptsMoney,purchasing power of money,liquidity,credit money,electronic money,money circulation,commodity circulation,monetary system,standard money,fiat money,legal Tender,Gold Standard,Bimetallic Standard,unlimited power of legal tender,Grahams Law quasi money,M1,M2,M3.,
