Unit 4- "Money"

"MONEY"





Uses of money-
1. Medium of exchange- trade
2. Unit of account- economic worth in exchange process
3. Store of value- money holds value over period of time, where as products do not


Types of money-
1. Commodity money- gets value from the type of material from what it's made
2. Representative money- paper money backed up by something tangible, gives it value
3. FIAT money- it's money because the government says so


Characteristics of money-
1. Portable- may travel in pocket
2. Durable- can wash & still survive
3. Scarce- cards used now, unsafe to carry cash
4. Divisible- 4 quarters, 10 dimes, etc.
5. Acceptable- everyone will accept cash
6. Uniform- can be used anywhere



Money Supply- (most liquid(easy to break down to cash))
1. M1 Money- Currency (cash & coins, checkable deposits & demand deposits, traveler's checks)
2. M2 Money- Consists of M1 Money along saving accounts, market accounts, and deposits held by banks outside the U.S.
3. M3 Money- Consists of M2 money & certificates of deposits(CD's) held by private institutions













FEDERAL RESERVE BANK (FED)


Functions of the Fed-
1. issues paper $
2. lends money to banks & charges them in interest
3. check clearing service for banks
4. personal bank for government
5. supervises member banks
6. controls money supply