3 functions: 1/ Medium of Exchange—promotes economic efficiency by minimizing the time spent in exchanging goods and services Must be easily standardized Must be widely accepted Must be divisible Must be easy to carry Must not deteriorate quickly 2/ Unit of Account—used to measure value in the economy: we measure the value of goods & services in terms of money. 3/ Store of Value— power - used to save purchasing power; most liquid of all assets (that why we want to keep money) but loses value during inflation . | Chapter 3 What Is Money? Meaning of Money Money (money supply)—anything that is generally accepted in payment for goods or services or in the repayment of debts (coins, bill, checks). Wealth—the total collection of pieces of property that serve to store value (checking account, stock, bonds, cars, houses ) Income—flow of earnings per unit of time 3- Functions of Money 3 functions: 1/ Medium of Exchange—promotes economic efficiency by minimizing the time spent in exchanging goods and services Must be easily standardized Must be widely accepted Must be divisible Must be easy to carry Must not deteriorate quickly 2/ Unit of Account—used to measure value in the economy: we measure the value of goods & services in terms of money. 3/ Store of Value— power - used to save purchasing power; most liquid of all assets (that why we want to keep money) but loses value during inflation 3- Evolution of the Payments System Commodity Money: money made up of precious metal such as gold or silver or another valuable commodity. Fiat Money: paper currency. Checks Electronic Payment E-Money 3- 3- How Reliable are the Money Data? Revisions are issued because: Small depository institutions report infrequently Adjustments must be made for seasonal variation We probably should not pay much attention to short-run movements in the money supply numbers, but should be concerned only with longer-run movements 3- 3- 3- | Chapter 3 What Is Money? Meaning of Money Money (money supply)—anything that is generally accepted in payment for goods or services or in the repayment of debts (coins, bill, checks). Wealth—the total collection of pieces of property that serve to store value (checking account, stock, bonds, cars, houses ) Income—flow of earnings per unit of time 3- Functions of Money 3 functions: 1/ Medium of Exchange—promotes economic efficiency by minimizing the time spent in exchanging goods and services Must be easily standardized Must be widely accepted Must be divisible Must be easy to carry Must not deteriorate quickly 2/ Unit of Account—used to measure value in the economy: we measure the value of goods & services in terms of money. 3/ Store of Value— power - used to save purchasing power; most liquid of all assets (that why we want to keep money) but loses value during inflation 3- Evolution of the Payments System Commodity Money: money made up of precious metal such as gold or silver or another valuable commodity. Fiat Money: paper currency. Checks Electronic Payment E-Money 3- 3- How Reliable are the Money Data? Revisions are issued because: Small depository institutions report infrequently Adjustments must be made for seasonal variation We probably should not pay much attention to short-run movements in the money supply numbers, but should be concerned only with longer-run movements 3- 3- .
