Unit 4 - Money (3-4-16)

Money

Uses of money:

• Median of Exchange - to trade
• Unit of Account - establishes economic worth in exchange process
• Store of Value - money holds value for period of time

Types of money:

• Commodity - get its value from type of material from which it was made
• Representative - paper money backed up by something tangible, giving it value
• Fiat - money because government says so. 

Characteristics of money:

• Portable
• Durable
• Scarce
• Divisible
• Acceptable
• Uniform

Money Supply:

• M1 money - (1) cash & coins, (2) check-able deposits/demand deposits, (3) travelers checks)
• M2 money - consists of M1 money, savings accounts, market accounts, and deposits held by banks outside the U.S., not as liquid to convert
• M3 money - consists of M2 money and certificates of deposits held by private institutions