Ekonomi Moneter WHY STUDY MONEY IS IMPORTANT?

NAME            : Fitriani Wulandari

NIM                : A21112294

WHY STUDY MONEY IS IMPORTANT?

Money is anything can accepted to payment goods and services and to repayment of debt. Without money cycle of economic with imbalance. functions of money are:

1.      Money is medium exchange. Accepted as payment for goods and services. The difficult with barter can do by money.

2.      Money is a unit of account. Money is used to measure value. As unit of account money can speed up the exchange.

3.      Money is a store of value. use money to save, so you are accumulate wealth buy stuff later.

And why study money is important? Because money is very close relationship to the economic variables and determinant health economic of the country. Measures of the money supply have exhibited fairly close relationships with important economic variables such as nominal gross domestic product (GDP) and the price level. the money supply provides important information about the near-term course for the economy and determines the level of prices and inflation in the long run. Central banks, including the Federal Reserve, have at times used measures of the money supply as an important guide in the conduct of monetary policy. There are 3 economic variables, they are:

1.      Money and Business Cycles

ü  Evidence suggests that money plays an important role in generating business cycles

ü  Recessions (unemployment) and booms(inflation) affect all of us

ü  Monetary Theory ties changes in the money supply to changes in aggregate economic activity and the price level.

2.      Money and Inflation

ü  The aggregate price level is the average price of goods and services in an economy

ü  A continual rise in the price level (inflation) affects all economic players

ü  Data shows a connection between the money supply and the price level

3.      Money and Interest Rates

ü  Interest rates are the price of money

ü  Prior to 1980, the rate of money growth and the interest rate on long-term Treasure bonds were closely tied

ü  Since then, the relationship is less clear but still an important determinant of

ü  interest rates

Monetary police is the management of the money supply and interest rate, while fiscal policy is government spending and taxation. Fiscal policy connected with budget deficit, budget surplus, and any deficult must be financed by borrowing. When budget deficit is the excess of expendictures over revenues for a particular year and budget surplus is the excess of revenues over expendictures for a particular year.

Source:

http://home.cerge-ei.cz/pstankov/teaching/VSE/reading/mishkin1.1.pdf

Wilson. “What Is Money? Is Important?” ”http://www.federalreserve.gov/faqs/money_12845.htm. 2 Agustus 2013. (Diakses hari sabtu 7 Sepetember 2013, Pukul 04:00).