Fundamentals of Economics - Money and Banking

Flashcards covering the fundamentals of money, financial systems in Malaysia, and central bank tools for controlling money supply.

What are the three primary functions of money defined in the lecture?

Medium of Exchange, Unit of Account, and Store of Value.

In the context of different monetary systems, how is fiat money defined?

A monetary system in which money has no intrinsic value but is backed by the government.

According to the 'Economics in Practice' section, what unique item is used as a means of payment in the Solomon Islands?

Dolphin teeth.

What are the six desirable qualities of money listed in McEachern (2006)?

1. Durable, 2. Portable, 3. Divisible, 4. Uniform quality, 5. Low opportunity cost, and 6. Stable value.

According to Bank Negara Malaysia (BNM), what components make up the measurement of M1?

Currency in circulation + Demand Deposits.

Why is a credit card not considered money according to the transcript?

It is a means of deferring payment and is instead considered a short-term loan from the credit card company to the user.

What are the three major reasons or motives for the demand for money?

Transactions Demand for Money, Speculative Demand for Money, and Precautionary Demand for Money.

How is 'Net Worth' calculated on a bank's balance sheet?

$$\text{Total assets} - \text{Total liabilities}$$

What is the formula for the 'money multiplier' assuming the banking system is closed?

$$\frac{1}{\text{reserve ratio}}$$

What are the three tools used by the central bank (BNM) to control the quantity of money supply?

1) Required Reserve Ratio, 2) Discount Rate, and 3) Open Market Operations.