Monetary Economics is part of economic science which studies the nature and function of the influence of money on economic activity. In general, economic activity can be interpreted as an activity that affects the unemployment rate of production, prices and trade relations / international payments.
The reasons why the need to study the monetary economy in order to know in depth how the mechanism of money creation, interest rates, money markets, monetary systems and policies, and international payments. In addition, in order to find out and analyze a monetary phenomenon in relation to the effects of monetary policy on economic activity.
1.2. Role and Functions of Money
Money is a tool used to make payments of goods, services, or debt. Function as a unit of money is the measure of value, as a means of exchange, and as a means of storing wealth.
1.3. Definition of Money
Based on the level of liquidity, the definition of money is divided into 3 types, namely:
M1 is currency plus paper and metal deposits in the form of checking accounts (demand deposits).
M2 is M1 + savings + time deposits (time deposits) at commercial banks.
M3 is M2 + savings + time deposits at savings institutions of non-banking.
M1 is the most liquid, because it makes the process very fast cash and without any loss of value.
1.4. Value of Money
Value of money is measured by its ability to be exchanged for goods and services and foreign exchange. Thus the amount of money determined by the price of goods and services. There are three methods for measuring the value of money, namely by using the cost of living index, index of prices of goods of trade, and the GNP deflator.
1.5. Classification Money
Money can be classified based on physical properties and materials used to make money, the party issued / circulated, and the relationship between the value of money as money with the value of money as the goods.
There are several types of money on the basis of the third classification, among others:
1) Full bodied money
Full bodied money is money which the same value as the goods with its value as money. Full-bodied type of money is like gold and silver.
2) Representative full-bodied money
Usually this kind of money made of paper, thus its value as the goods there is no (zero). Actually this kind of money only represents (represent) the number of goods / metal where the metal values as equal to the value of goods for money.
3) Credit money
Credit money is a kind of money where its value as money is greater than the value of the goods. Credit money can be shaped token coins, rep token money, paper money issued by the government, the paper money issued by central banks, and demand deposits.
1.6. Monetary Standards
a) Standard twin (bimetallism)
Standard twin occurs when the government uses gold and silver as the base value of its currency.
b) Standard gold
A country using the gold standard system if the value associated uanganya eye / based on the value of certain gold weighing.
c) the standard Fiat
Fiat is a certified gold standard (as proof of ownership of gold held, where owners can take the gold every time) that is guaranteed less than 100%.
d) Money giral (deposit money)
Giral money is in bank deposits that can be withdrawn at any time by using checks.
e) Money quasi
Quasi-money consists of time deposits and savings and foreign currency accounts of domestic private
