3/20/2017

Unit 4
The barter system goods and services are traded directly, there is no money exchanged.

What is money?
Money is anything that is generally accepted in payment for goods and services.
Money is NOT the same as wealth or income.
Wealth is the total collection of assets that store value.
Income is flow of earnings prevent of time

Money can be used as a
1) medium of exchange as good and services
2) unit of account measuring the value of goods and services
3) store of value consumption and savings

3 types of money
Representative money  Commodity money      Fiat money
IOU'S                            Gold,Silver, Cigarettes  Coins, Money because government says it

Characteristic of Money
1) Durability
2) Portability
3) Divisibly
4) Uniformity
5) limited supply
6) Acceptability

3 Types of Money
Liquidity is ease with which an asset can be access and converted into cash ( liquidized)
M1( High Liquidity)  Coin = Currency, and checkable deposits, demand deposits
M2 ( Medium Lucidity) M1 plus savings deposits (market money accounts)
CDS = certificate of deposits and mutual funds below $100k
M3 (Low Liquidity) M2 plus time deposits adobe $100k