A monetary item is an economic item very different from the other two basic economic items because of its monetary nature; namely, the unique combination of its attributes during inflation and deflation, some of which are listed below.
A monetary item is an item the change in real value of which is indicated by internal inflation and deflation.
A monetary item´s attributes in combination determine its monetary nature during inflation and deflation.
Attributes of a monetary item during inflation and deflation
(i)
It is an unstable medium of
exchange.
(ii)
It is an unstable store of
value.
(iii)
It is an unstable unit of
account
(iv)
It is easily portable or
transferable.
(v)
It is generally available
in small change.
(vi)
It is only a monetary item
within an economy.
(vii)
It is legal tender.
(viii)
The change in its real
value is indicated by internal inflation and deflation.
(ix)
Monetary items are generally
affected evenly within an economy by inflation and deflation.
(x)
It loses its monetary
nature when it´s physical representation (bank note or coin) only has value as
a collector´s item; i.e., when it becomes a variable real value non-monetary
item.
(xi)
As a bank note or coin, the
internal unit of currency has its denomination permanently printed or moulded
on it.
(xii)
In modern economies it is created
by government fiat in the banking system.
Nicolaas Smith
Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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