Macro9 Essay Example | Topics and Well Written Essays - 1000 words

Macro9 - essay ExampleStore of treasure is a term that intrinsically refers to an instrument which can be relieve today with the faith that a commodity of equivalent value could be obtained in lieu of the bosom at some future period. In some other words, possessing a fixed sum of gold X today would mean the possessors purchasing power come ining to X, as long as she keeps it to herself, i.e., the value of this amount X is assumed not to depreciate (Hirshleifer, Glazer & Hirshleifer, 2005, p. 442). However, post the tumultuous phase of the world-wide financial community, such a term is no longer applicable as money deliver today is seldom expected to possess the same value tomorrow. This is especially so due to the policies of the profound bank of any economy that brings changes to the value of money according to the demands of the prevailing economic situation. During recessions, value of money is found to grow higher while it deteriorates during times of inflation. In the latter phase for instance, the same amount of money X can buy a much lower quantity of goods than it could have during the earlier period.In such a scenario, it is safer for the economists to assume a definition of money that hints towards the inclusion of relatively illiquid assets, i.e., those which cannot be circulated as smoothly as others and not readily accepted as modes of payments. In such cases, in that location longer exists any motive behind increasing the supply of money. According to the identity underlying the sum of money theory of money,Normally, during times of inflation, purchasing powers of people fall, so that T falls in value. On the other hand, recessions enhance the purchasing power of people so that T rises. Hence, assuming the product of P.T to be constant, movements in V are bound to be reflected through inverse movements in M (Minsky, 2008, p. 125). Thus, it is safer to include those goods indoors the sphere of money which have a low velocity (V), sinc e they also ensure a more-or-less constant supply of