15宏观经济学英文版(多恩布什)课后习题答案全解

CHAPTER 15

THE DEMAND FOR MONEY

Solutions to the Problems in the Textbook:

Conceptual Problems:

1. Money is any asset that is widely used as a medium of exchange. People want to hold money since it

simplifies their current or future transactions. Since the nominal value of money is always known with certainty, it is a very safe and liquid asset, unless there is a very high rate of inflation. Therefore holding money protects asset holders against potential capital losses on riskier assets.

2. In a society in which there was no money, all trade would be completely based on barter. But barter is

fairly inefficient, since suppliers of goods and services can't always find people who are both in need of the goods and services being offered and willing to trade something of value to the suppliers.

Therefore, sooner or later, some form of money has to be invented to facilitate trade. A good example of a money substitute is U.S. cigarettes, which were used as medium of exchange during the hyperinflation in Germany in 1922/23, in P.O.W. camps after World War II, and in some Eastern European countries during the transition from command economies to more market-based economies when people lost confidence in their own currencies.

It is easier to imagine a society in which there is no currency but everyone has a credit or debit card. The cashless purchase of goods via credit or debit cards (or via e-commerce) is not only convenient for customers but can also provide valuable information to sellers about the buying habits of consumers (which is one reason grocery stores now willingly accept credit or debit cards). In a cashless society all transactions would require electronic fund transfers through bank computers. At the end of the month, all accounts would have to be settled with the company that issued the credit or debit card, again through electronic fund transfers. This requires investment in computer technology, not only for banks but also for merchants. Such a system may seem highly efficient, but it may not work well for very small purchases, such as a magazine at a newspaper stand, a can of soda from a vending machine, or a local phone call. However, financial institutions have already developed pre-paid cash cards or phone cards that allow the purchase of smaller items or phone calls, with the amount of the purchase automatically deducted from the card.

It should be noted, however, that a cashless society still requires money, that is, funds that can be stored in accounts, whether these are traditional bank accounts used to settle outstanding bills or accounts that exist simply for e-commerce. However, if pre-paid cash cards, debit and credit cards, or e-commerce funds are used increasingly, monetary aggregates may have to be redefined.

3. One could certainly make an argument for including credit card limits as part of money stock, since

people substitute credit cards for cash as a means of payment. They may also use unused credit lines for precautionary purposes. But if we include this form of credit in the money stock, it becomes difficult to justify excluding others. Therefore it may be better not to include credit card limits in the definition of money.

4. In deciding how many traveler's checks to take on a vacation, an individual has to weigh the cost of

obtaining the checks against the probability of cash being stolen and the possibility that personal checks or credit cards might not be honored. The lower the cost of traveler's checks and the higher the probability that cash may be stolen, the larger the sum that is likely to be carried in traveler's checks.

On the other hand, holding cash or traveler's checks involves an opportunity cost, since no interest can be earned on cash or traveler's checks. Therefore, if credit cards are accepted at the vacation spot, vacationers may rely primarily on credit cards as a means of payments, since they can earn interest on

1