Fundamentals of Economic Analysis: A Causal-Realist Approach

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9. Money and Prices

  • Fundamentals of Economic Analysis
June 15, 2007

Tags Money and BanksAustrian Economics OverviewPhilosophy and MethodologyPrices

In the history of money, bartering was awkward because wants were not divisible. Direct exchange depended upon a double coincidence of wants. Demand for a medium of exchange grew until a general medium of exchange emerged, like gold and silver.

A medium of exchange should display these characteristics: must be generally acceptable, widely demanded for non-monetary uses, easily portable, homogeneous, highly divisible and highly durable.

Although it is beneficial to have more of any other commodity, it is not true of money. A greater supply of money merely dilutes the purchasing power of each money unit. The consequences of inflation include a rise in prices, a fall in purchasing power, and a stealth tax on citizens.

The ninth in a series of ten lectures, from Fundamentals of Economic Analysis: A Causal-Realist Approach.

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