Unit 4: The Uses of Money

Uses of Money

• Medium Exchange (Barter or Trade)
• Unit of Account (Is this the right value?)
• Store of Value (Is it worth it?)

Types of Money

• Commodity Money
• Item, Material, Gold Silver
• Representative Money
• IOU'S (Doesn't have a value) 
• Fiat Money 

Characteristics of Money

• Durability
• Money in the same composition 
• Portability
• Where the Money is being carried
• Divisibility 
• Breaking Money Down 
• Uniformity 
• Scarcity
• Acceptability 

Money Supply

M1 Money

• Cash 
• Coins
• Currency
• Traveler's Check
• The demand for Checkable Deposits
• Largest Component of M1 Money

M2 Money

• M1 Money + Savings Accounts

M3 Money 

• M2 Money + Money Markets accounts + CD'S (Certificate of Deposits) 

Liquidity 

• Easy to convert to cash 
• (M2+M3 are very liquid)