Unit v money
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Transcript of Unit v money
Qualities of Money
•Stability•Portability•Durability•Uniformity•Divisibility•Recognizability
Stability
•Value does not fluctuate a great deal
Recognizability
•Hard to copy but easy to recognize
Portability
•Small and light enough to carry with you
Durability
•It lasts for a long time
Uniformity
•Denominations have the same value across the board
Divisibility
•You can make change
What money does
•Eliminates the double coincidence of wants•You must find someone who wants what you want and will trade for what you have.
Functions of money
•Medium-of-exchange•Store-of-value•Standard-of-value
Medium-of-Exchange
•Eliminates double coincidence of wants
Standard-of-Value
•Simplifies price comparisons
•Agreed to measure for stating prices
Store-of-Value
•Permits money to be held for use at a later time
Kinds of Money
•Currency•Checkable deposits
•Travelers checks
Currency
•Paper money and coins•Also known as Fiat money
•Has value because the government says it does
Checkable Deposits
•Can make withdrawals and payments by check•Savings•Credit Unions
Travelers Checks
•Duh!! It’s a travelers check!
Sources of Money’s Value• Representative Money
•Item that has value because it can be exchanged for something valuable
• Commodity Money•An item that has value of its own
and is used as money
Categories of Money
•M1•M2•M3
M1
•Currency, Checkable Deposits, Travelers Checks
M2
•M1+Money Market Accounts, Savings Accounts, Mutual Fund Accounts
M3
•M2+Large CD’s (100,000+)