Chapter 3- What is Money?
o Checks
An instruction to your bank to transfer money from your account
Money
Anything that is generally accepted as payment for goods or services or in the repayment of debts
• Income
Flow of earning per unit of time
• M2
M1+ Small denomination time deposits+ savings deposits and money market accounts + money market mutual fund shares
• M1
Most Liquid Assets Currency + Traveler's Checks + Demand Deposits + Other Checkable Deposits
o Electronic Payment
Online bill payment
o Fiat Money
Paper money decreed by the government as legal tender
• Wealth
The total collection of pieces of property that serve to store value
o Commodity Money
Valuable, easily standardized and divisible commodities (precious metals, cigarettes)
o Medium of Exchange
• Eliminated the trouble of finding a double coincidence of needs
o Unit of Account
• Used to measure value in the economy • Reduces transaction costs
o Store of Value
• Used to save purchasing power over time • Other assets also serve this function • Money is the most important liquid assets but loses value during inflation
