[经济学]Chapter 25 money and commercial__ banking.ppt

Chapter 25Money and Commercial Banking 黄新飞 中山大学国际商学院 Content in Brief Interest Rates: The Price of Money The Demand for Money Money Supply The modern financial system The Evolution of Money Barter Commodity Money Modern Money What is Money? That’s easy to answer, you may say. It’s the cash in our pockets. But money actually has a much broader definition. It is anything that can be widely used and accepted in exchange for other goods and services. The Functions of Money Money has three functions in the economy: Medium of exchange Unit of account Store of value Money in the U.S. Economy Currency is the paper bills and coins in the hands of the public. Demand deposits are balances in bank accounts that depositors can access on demand by writing a check. How is Money Defined? CASE STUDY: Where Is All The Currency? In 2001 there was about $580 billion of U.S. currency outstanding. That is $2,734 in currency per adult. Who is holding all this currency? Currency held abroad Currency held by illegal entities Interest Rates When we examine how money affects economic activity, we will focus on the impact of the interest rate. Technically, the interest rate is the amount of interest paid per unit of time expressed as a percentage of the amount borrowed. Interest is the payment made for the use of money, and it is often called the “price of money.” Interest Rates There is really a vast array of interest rates. There are three major reasons why interests rates differ. Term of the Loan This refers to the length of time until it must be paid off. This can range from overnight loans to up to 30 years or more for a home mortgage. Liquidity An asset is said to be liquid if it can be converted into cash quickly with little loss of value. In contrast, because of the higher risk and difficulty of extracting a borrower’s investment, illiquid assets or loans usually command higher interest rates. Nominal Interest Rate The nominal interest rate measures the yield in dollar