Money (03/20/17)

The Barter System: goods and services are traded directly. There is no money exchanged.

Money: is anything that is generally accepted in payment for goods and services. Money is not the same thing as wealth or income.

Wealth: is the total collection assets that store value.

Income: is a flow of earnings per unit of time.

Money can be usd as:

1) Medium of Exchange: it is used to determine value.

2) Unit of Account: comparing cost or price.

3) Store of value: how wel does the money hold.
-Where do you put it and when do you expect it to grow

Types of Money

Characteristics of money

1) Durability: money is durable
2) Portability: you can carry it anywhere
3) Uniformity: all the same
4) Divisibility: break it in many ways
5) Limited supply
6) Acceptability

Liquidity: ease with which an asset can be accessed and converted into cash (liquidized).

Types of Money Supply

M1 (High liquidity) - Coins, Currency, and Checksble deposits ( personal and corporate checking accounts which are the largest components of M1). AKA demand deposits.
In general, this is the money supply.

M2 (Mediun Liquidity) - M1 plus savings deposit ( money market accounts), time deposits ( CD = certificate of deposit), and Mutual Funds below $100K.

M3 ( Low Liquidity)- M2 plus time deposits above $100k.