Monetary Economics

1. Functions and Nature of Money
   1. Medium of Exchange
      1. Definition and purpose
         1. Facilitates transactions by eliminating the need for barter
         2. Increases economic efficiency by reducing transaction costs
      2. Characteristics
         1. Widely accepted
         2. Portable and easy to handle
         3. Divisible into smaller units
      3. Evolution
         1. Historical evolution: from barter to commodity money to fiat money
         2. Role of technology: digital payments and cryptocurrencies
      4. Challenges
         1. Counterfeit threats
         2. Digital payment fraud
   2. Unit of Account
      1. Definition and role
         1. Provides a common measure of value for goods and services
         2. Facilitates comparison and assessment of prices and costs
      2. Characteristics
         1. Stable value
         2. Recognized by market participants
      3. Impact on accounting and financial transactions
         1. Simplifies record-keeping and financial planning
         2. Basis for financial contracts and reporting
      4. Currency revaluation and redenomination
   3. Store of Value
      1. Definition and importance
         1. Preserves value over time, allowing for future consumption
         2. Essential for saving and investment
      2. Characteristics
         1. Durable and resilient to economic fluctuations
         2. Limited supply to maintain purchasing power
      3. Inflation impact
         1. Inflation as a threat to storing value
         2. Methods to preserve value: interest-bearing accounts, inflation-indexed bonds
      4. Alternatives to money as store of value
         1. Real estate, stocks, and commodities
   4. Standard of Deferred Payment
      1. Definition and significance
         1. Used to settle debts and financial obligations at a future date
         2. Facilitates credit transactions and economic growth
      2. Historic development
         1. Evolution from commodity-based systems
         2. Introduction of legal tender laws
      3. Relevance in modern economy
         1. Base for issuing debt instruments like bonds
         2. Trust in money’s future acceptance and value retention
      4. Challenges
         1. Impact of inflation and deflation on debt value and payment
         2. Currency depreciation and its effects on international debt agreements