-Uses of Money (3)
1. Medium of exchange
*Trade or barter
2. Unit of account
*Establishes economic worth
3. Store of value
*Money holds it's value over a period of time
-Types of Money (3)
1. Commodity Money
*ex. Gold and silver coins (gets value from material from which it's made)
2. Representative money
*Paper money backed by something tangible
3. Fiat money
*Money because the government says so
-Characteristics of Money (6)
1. Durability
*Money lasts through money transactions
2. Portability
*Transport money in many forms
3. Uniformity
*Even (looks alike); uniform
4. Divisibility
*Divide bills into smaller units
5. Scarcity
*Might not have the money at that time
-i.e. making change
6. Acceptability
*Acceptable anywhere
-M1 Money
* 75% of the money in circulation
* More liquid (easily converted to cash)
* Consists of:
-Currency: cash and coins
-Check able/Demand deposits
*checking accounts
-Travelers Checks
-M2 Money
* 25% of the money in circulation
* Not as easily converted to cash speedily
* Consists of:
-Savings accounts
-Money Market accounts
*Required amount of money needed to open/maintain an account
-Certificates of Deposits (CD)
-Deposits held by banks outside of the U.S.
-M1 Money
*Money is backed by faith
*ASSESTS = LIABILITIES + NET WORTH
Assets: What you OWN
Liabilities: What you OWE
Net Worth: What you are WORTH
Banking Transactions
-Bank Deposits are subject to reserve Requirement
-Reserve Ratio = Commercial bank's required reserves / Commercial bank's checkable-deposits liabilities
-Excess Reserves = Actual Reserves - Required Reserves
-Banks create money by lending excess reserves, and destroy it by loan repayment. Purchasing bonds from the public also creates money
Need Help?
I love your blog. You have all the notes and I like how you put the key points/words that we need in a different color than the entire sentence. I like how you added pictures, videos, and practice problems for others to better understand the unit. There is not anything I can think of that you should add. Great work!!
ReplyDeleteThis part of your Unit IV blog post was so helpful in understanding the difference between M1 and M2 money. The different colors made me more interested in your blog. Good Job!
ReplyDelete