Money and Banking Ch. 2

Legal Tender

Assets accepted for repayment of debt to the gov, as well as private transactions

Dollarization

A situation where a market uses another’s countries currency as money.

Semi Dollarization

When a country uses its currency as well as another country’s currency.

Medium of exchange

Anything that is accepted by both parties in a transaction

Unit of Account

The monetary value that is placed on an good, service, or resource.

Store Value

Money we save today to spend in the future. Store value of money often declines as inflation increases, but still carries some purchasing power overtime.

Commodity money

An asset that can be used as money and have other uses

Monetary Aggregates

The way economist measure the money supply and growth rate in the economy.

Fiat Money

Assets that have value because people trust it, it has no intrinsic value.

Time preference

The preference people have to consume now or in the future (more often people want to consume in the present)l.

Future Value

The value an asset will hold in the future

Compound interest

The interest earned on the principal plus interest

Future Value Formula

PV(1+i)^n = FV

Commodity Interest formulas

if monthly we must divide rate by (12) if daily we must divide rate by (365). then procedure with FV formula.