Money
Notes from 3/4/16
Uses of Money
-Medium of Exchange: To trade or barter
-Unit of Account: Establishes economic worth in the exchange process
-Store of Value: Money holds its value over a period of time, whereas products do not
Types of Money
-Commodity $: Gets its value from the type of material from which it is made
-Example: Gold and Silver Coins
-Representative $: Paper money backed by something tangible that gives it value
-Fiat $: It is money because the government said so
-Used in the United States
Characteristics of Money
a. Portable- Can fold, move, etc.
b. Durable-Can leave money in your pocket, wash clothes, and the money will be fine
c. Scarce- Only having cash is rare
d. Divisible- How many ways can you break a dollar?.....A LOT
e. Acceptable- No where cash is not allowed
f. Uniform- Dollar is same no matter where you go
Money Supply
a. M1 $
-Consists of currency
-Currency:
+Cash and Coins
+Checkable Deposits/Demand Deposits (Checking Accounts)
+Travelers Checks
-75% of money currently in circulation
-Most liquid- Easy to convert to cash
b. M2 $
-Consists of M1 $ along with savings accounts, money market accounts, and deposits held by private institutions
-Not as liquid
-Money Market: Earn interest while in checking account
c. M3 $
-Consists of M2 $ plus certificates of deposits (CDs) held by private institutions
-If money here is withdrawn early, there is a penalty
+Example: Taking money out of your 401k plan
-JaelyNoTainted
Like Jaelyn (SPACE) Not (SPACE) Tainted
Get it?
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