Money:
I. Uses for money
- money of exchange
- unit of account
- store of value
-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.
- durable
- portable
- $ is scarce
- divisible (able to use coins, half dollars etc.)
- acceptable (cash is acceptable)
- uniform
- 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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