Chapter 3: What is Money?

M2

a measure of money that adds to M1: money market deposit accounts, money market mutual fund shares, small denomination time deposits, savings deposits, overnight repurchase agreements, and overnight Eurodollars

M1

a measure of money that includes currency, traveler's checks, and checkable deposits

store of value

a repository of purchasing power over time

smart card

a stored value card that contains a computer chip that lets it be loaded with digital cash from the owner's bank account whenever needed

wealth

all resources owned by an individual, including all assets; the total collection of pieces of property that serve to store value

hyperinflation

an extreme inflation in which the inflation rate exceeds 50% per month

medium of exchange

anything that is used to pay for goods and services; eliminates the trouble of finding a double coincidence; must be easily standardized, widely accepted, divisible, easy to carry, and not deteriorate quickly

unit of account

anything used to measure value in an economy; reduces transaction costs

e-cash

electronic money that is used on the Internet to purchase goods or services

commodity money

money made up of precious metals or another valuable commodity

electronic money

money that exists only in electronic form and substitutes for cash as well (e-money)

fiat money

paper currency decreed by a government as legal tender but not convertible into coins or precious metal

currency

paper money (such as dollar bills) and coins

income

the flow of earnings per unit of time (a flow concept)

monetary aggregates

the measures of the money supply used by the Federal Reserve System (M1 & M2)

payments system

the method of conducting transactions in the economy

liquidity

the relative ease and speed with which an asset can be converted into cash