UNIT 4:MONEY

USES OF MONEY

-As a medium of exchange.

 *To barter (trade).

-Unit of account

 *This establishes worth in the exchange process.

-Storage values

 *Money holds value over a period of time.

TYPES OF MONEY

-Commodity money

 *It gets value from the type of material from which it is made.

-Representative money

 *Paper money backed by something tangible that gives it value.

-Fiat money

 *This is the type of money used in the U.S. It is money because the government says so.

CHARACTERISTICS OF MONEY

-Portable
-Durable
-Divisible
-Limited supply
-Acceptable
-Uniform

MONEY SUPPLY

-M1 Money (75%)

 *It consists of currency in circulation.
 *Check-able deposits(checking account).
 *Traveler's check.
 *It is held as a medium of exchange.
 *It is the most liquid.

-M2 Money

 *It consists of M1 money along with savings account, money market accountand deposits held by banks        outside the U.S.

-M3 Money

 *It encompasses M2 money and certificates of deposits (CD's).