20 minute keynote challenge money, money, money
TRANSCRIPT
20 Minute Keynote ChallengeMoney, Money, Money...
Your task:
•Using your workbooks, textbooks, and online sources create a keynote which answers your assigned question. Please cite your sources.
•The goals is to provide accurate, correct, and complete answers.
•These will be combined into one keynote and posted on our wiki.
Group 1: Min Soo, Tim, Yen Fang, Youyu
•Explain (in extreme detail) the three functions of money. Provide some examples.
3 Functions of Money
•Medium of Exchange
•Unit of account
•Store of value
Medium of exchange
•accepted by people
•portable
•uniform
•divisible
Standard of value
• familiar
•divisible
•accepted
Store of value
•durable
•have a stable value
Examples of money
•Precious metals, gem stones (gold, silver, etc)
•Currency (dollars & coins)
•Checks
•Cards
Source
•p. 183 Rainbow book
•p.229 Textbook
Group 2: Geon Ah, Paddy, Ching Ching
•Explain (in extreme detail) M1, M2, and M3.
M1, M2, M3M1, M2, M3
Ching ChingPaddy
Geon-Ah
Ching ChingPaddy
Geon-Ah
M1M1All currency (coins, paper money) supplied by the government
Bank reservations are not included
Also include checkable deposits
supplied by commercial banks and saving institutes
includes items that are used as medium of exchange
ex)
M2M2Broader measure of money stock
Key economic indicator used to forecast inflation
Everything included in M1 + savings deposits + small time deposits +money market deposit accounts (MMDAs) + non-institutional money market mutual funds (MMMFs) + certain other short-term money market assets
M3M3Money that we can’t get our hands on
But also includes M1 and M2
includes all components of M2 plus number of financial assets and instruments generally employed by large businesses and financial institutions
ex) large time deposits, institutional money market funds, short-term repurchase, and other larger liquid assets funds
CitationsCitations
Rainbow book. p. 187
Wikipedia. <http://en.wikipedia.org/wiki/Money_supply>
Welker’s Wikinomics. <http://welkerswikinomics.wetpaint.com/page/The+Supply+of+Money>
Group 3: DJ, Kevin, Sarah
•Explain (in extreme detail) MV=PQ.
The Equation of The Equation of ExchangeExchange
The Equation of The Equation of ExchangeExchange
MV = PQMV = PQMV = PQMV = PQ
M = supply of moneyM = supply of money
V = velocity of money (average number of times per year a V = velocity of money (average number of times per year a
dollar is spent on final goods and services)dollar is spent on final goods and services)
P = price levelP = price level
Q = physical volume of all goods and services produced Q = physical volume of all goods and services produced
(real GDP(real GDP
MV = PQMV = PQMV = PQMV = PQ
MV represents total amount spend by purchasers of outputMV represents total amount spend by purchasers of output
PQ represents total amount received by sellers of that PQ represents total amount received by sellers of that
outputoutput
Both MV and PQ = nation’s nominal GDPBoth MV and PQ = nation’s nominal GDP
The dollar value of total spending has to equal the dollar The dollar value of total spending has to equal the dollar
value of total outputvalue of total output
Stable VelocityStable VelocityStable VelocityStable Velocity
GDP/M defines VGDP/M defines V
V in the equation of exchange is relatively stableV in the equation of exchange is relatively stable
Stable means factors altering velocity (such as how frequently people Stable means factors altering velocity (such as how frequently people
are paid) change gradually and predictably and can be readily are paid) change gradually and predictably and can be readily
anticipated.anticipated.
Today velocity is higher than it was several decades agoToday velocity is higher than it was several decades ago
Velocity does not change in response to changes in the money supplyVelocity does not change in response to changes in the money supply
Changes in MChanges in MChanges in MChanges in M
If the supply of money grows faster than the rate of real output If the supply of money grows faster than the rate of real output
(changes in Q), then there will be inflation in the economy(changes in Q), then there will be inflation in the economy
A change in M causes a proportionate change in nominal BDPA change in M causes a proportionate change in nominal BDP
Thus, changes in the money supply allegedly have a predictable Thus, changes in the money supply allegedly have a predictable
effect on nominal GDP (PxQ)effect on nominal GDP (PxQ)
An increase in M increases P or Q or some combination of both An increase in M increases P or Q or some combination of both
and a decrease in M has the opposite effect.and a decrease in M has the opposite effect.
SourcesSourcesSourcesSources
Old Econ textbook (McConnell Brue) p.323-324Old Econ textbook (McConnell Brue) p.323-324
Macro Rainbow Book (Morton Goodman) Activity 36 p. 191Macro Rainbow Book (Morton Goodman) Activity 36 p. 191