UNIT 4

UNIT 4

Money

     I.        Uses of Money

a.       Medium of exchange: it is basically borrow or trade

b.       Unit Of Account: It establish economic value

-EX: Piano lesson and you pay $10 for ever lesson. Instead of paying instead the teacher wanted a cake. So from now on they pay with cake

c.       Store Of Value: money holds its value over a period of time where as products may not ( no matter where you store your money it doesn’t lose its value) Except the purchasing power

   II.        Types of Money

A.)   Commodity Money: It gets its value form the type of material from which it is made

-          EX: GOLD AND SILVER COINS

B.)    Representative money: It is paper money back from something tangible that gives it value

-          EX: IOU MONEY

C.)   Fiat Money: Money basic the government said so

 III.        Characteristics of Money

A.      Divisible: break the dollar bill into many ways.

B.      Portable: Put your money in socks, bra

C.      Uniform: A dollar it’s a dollar, doesn’t matter if you change the president but a dollar is a dollar

D.     Acceptable:

E.       Scare: Money will always be around but it wont

F.       Durable:

 IV.        Money Supplied

A.      M1 Money: 75 percent of money that comes from circulation comes from here (It is liquid- easy to convert)

1.      Cash and coins >Currency

2.      Checkable deposits >Demand deposits  

3.      Traveler’s checks

B.      M2 Money

-          Consist of M1 Money, Savings accounts, and deposits held by banks outside of the USA

-          Saving Account is not a transaction where you can’t pull out ( Only transfer from the saving to checking account)

C.      M3 Money

-          Consists of M2 Money and certificated of deposit money know as CD’s

-          What CD’s are if you keep money in it will grow