Ch 23 - Money Flashcards
Primary function of money?
Serves as medium of exchange, a unit of account, and a store of value.
3 main functions of money?
Medium of exchange, unit of account, & store of value.
What is a medium of exchange?
An Intermediary used in transactions to avoid the inefficiencies of bartering
What does it mean for money to be a unit of account?
It provides a common measure for pricing goods/services.
How does money function as a store of value?
It retains purchasing power over time.
What is liquidity?
ease with which an asset can be converted into cash.
What are the two types of money?
Commodity & fiat money.
What is the money supply?
Total amt of money available in economy.
What is commodity money?
Money that has intrinsic value / EX: gold or silver
What is fiat money?
Money that has value bc the gov decrees it as legal tender.
What are the main components of the money supply?
M1 & M2.
What does M1 include?
Currency, demand deposits, & other checkable deposits.
What does M2 include?
M1 + savings deposits, money market funds, & small time deposits.
What institution regulates the money supply in the U.S.?
The Federal Reserve
What is the Federal Reserve?
Central bank of the US responsible for monetary policy.
