Sunday, April 3, 2016

UNIT 4: Money

March 3, 2016
Money:
I. Uses for money

  • money of exchange 
  • unit of account
  • store of value
Unit of account
-economic worth in the exchange process.
-store of value- money holds its value over a period of time where as products may not.

II. Types of money

  • Commodity money- gets its value from type of material from which it is made (silver coins, gold coins)
  • Representative money- paper $ that is backed by something tangible that gives it value.
  • Flat money- money because the government says so.
III. Characteristics of money

  • durable
  • portable
  • $ is scarce 
  • divisible  (able to use coins, half dollars etc.)
  • acceptable (cash is acceptable)
  • uniform
IV. Money supply

  • M1 money- 1. Currency (coins and cash) 2. Checkable deposits or demand deposits 3. traveler's checks. *75% M1 money is mostly liquid and is easy to convert into cash*
  • M2 money- consists of M1 money + savings account + money market accounts + deposits held by banks outside of the U.S.
  • M3 money- M2 money + certificate deposit (cd's) *penalized from your own money*

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