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Functions of Money
 Medium of exchange
o Barter?
 Unit of accounting
o Compare costs-Movies
 Store of value
o Inflation?
Characteristics of Money
 Durable
 Portable
 Divisible-denominations
 Uniformity- $1 is worth a $1.
 Limited Supply
 Accepted
Types of Money
 Commodity money- objects
 Representative money- IOU’s
 Fiat money (legal tender)- government decree
A Money standard is the manner in which a nation assigns value
to its money.
Types of Currency
 Token coins (value of metal in each coin is less than its
exchange value)
 Federal reserve notes (1,5,10,20,50,100)
 United States notes (100s)
Money Supply
 M1 (can be spent immediately and against which checks can
be written) monies quickly converted to cash (Liquidity).
 M2 (M1 plus near monies)
o Savings account
o Money Market Mutual Funds