Study Guide to Man, Economy, and State with Power and Market

144 Study Guide to Man, Economy, and State with Power and Market
of money, and (4) the reservation demand for goods. The first
two determinants increase the PPM, while the latter two
decrease it.
9. Interlocal Exchange
A. Uniformity of the Geographic Purchasing
Power of Money
As with all goods, the money commodity will tend to
have one price in the market. Some allege that the PPM
of money can differ from region to region; is not the
price of a movie higher in New York than in Boise? Yet a
movie in New York is not the same good as one in Boise.
B. Clearing in Interlocal Exchange
The use of clearing houses greatly facilitates interregional
trade. If French consumers had to ship gold to
Russia every time they wished to buy a Russian good, and
vice versa, then there would be a lower volume of trade.
In contrast, with clearing only the net surplus of gold
needs to be shipped from one country to the other.
10. Balances of Payments
An individual’s “balance of payments” must always be in balance,
so long as cash balances and credit transactions are
included. In general an individual will always have huge “trade
deficits” with the owners of retail shops and huge “trade surpluses”
with his employer. The balance of payments for an
entire nation is simply the aggregation of all the individual citizens’
balances of payments.