Money and banking
| English | Chinese | Pinyin |
|---|---|---|
| money | 货币 | huò bì |
| barter | 物物交换 | wù wù jiāo huàn |
| medium of exchange | 交换媒介 | jiāo huàn méi jiè |
| store of value | 价值储藏 | jià zhí chǔ cáng |
| unit of account | 记账单位 | jì zhàng dān wèi |
| central bank | 中央银行 | zhōng yāng yín háng |
| commercial banks | 商业银行 | shāng yè yín háng |
| interest rates | 利率 | lì lǜ |
Before money 货币, there was barter 物物交换
- To swap your chickens for shoes, you had to find a shoemaker who happened to want chickens. Exhausting.
- Money solved that problem — and powers every modern economy.
Economics case lab
Classify real examples by the economic idea they show.
Which are functions of money? (Select all that apply.)
Money is a medium of exchange, store of value, unit of account and standard of deferred payment.
Money removes the need for barter's:
Barter needs both parties to want what the other offers — money avoids this.
Because money keeps its worth over time, it acts as a store of ______.
Store of value lets people save.
The four functions of money
- Medium of exchange 交换媒介: accepted in payment, so no barter needed.
- Store of value 价值储藏: keeps its worth over time, so you can save.
- Unit of account 记账单位: a common measure of prices.
- Standard of deferred payment: lets you borrow and repay later.
Money — banknotes and coins — works as a medium of exchange, a store of value, a unit of account, and a means of deferred payment
Modern money is valuable mainly because people accept it, not because of its material.
Fiat money works through general acceptability.
What makes good money
- It must be acceptable, durable, portable, divisible, scarce and hard to forge.
- Modern money is mostly numbers in bank accounts, not notes and coins.
The four functions of money: a medium of exchange, a store of value, a unit of account, and a means of deferred payment
Setting the interest rate is the job of the:
The central bank sets interest rates and issues currency.
Banks and the central bank 中央银行
- Commercial banks 商业银行 accept deposits, make loans, and enable payments.
- The central bank issues currency, sets interest rates 利率, and acts as banker to the government.
Money needn't have its own value. Modern "fiat" money is worth something only because everyone accepts it — not because it is gold. Acceptability is the key characteristic.
You've got it
- money's four functions: medium of exchange, store of value, unit of account, deferred payment
- good money is acceptable, durable, portable, divisible and scarce
- commercial banks lend and take deposits; the central bank sets interest rates