Qualities of Money

•Stability•Portability•Durability•Uniformity•Divisibility•Recognizability

Stability

•Value does not fluctuate a great deal

Recognizability

•Hard to copy but easy to recognize

Portability

•Small and light enough to carry with you

Durability

•It lasts for a long time

Uniformity

•Denominations have the same value across the board

Divisibility

•You can make change

What money does

•Eliminates the double coincidence of wants•You must find someone who wants what you want and will trade for what you have.

Functions of money

•Medium-of-exchange•Store-of-value•Standard-of-value

Medium-of-Exchange

•Eliminates double coincidence of wants

Standard-of-Value

•Simplifies price comparisons

•Agreed to measure for stating prices

Store-of-Value

•Permits money to be held for use at a later time

Kinds of Money

•Currency•Checkable deposits

•Travelers checks

Currency

•Paper money and coins•Also known as Fiat money

•Has value because the government says it does

Checkable Deposits

•Can make withdrawals and payments by check•Savings•Credit Unions

Travelers Checks

•Duh!! It’s a travelers check!

Sources of Money’s Value• Representative Money

•Item that has value because it can be exchanged for something valuable

• Commodity Money•An item that has value of its own

and is used as money

Categories of Money

•M1•M2•M3

M1

•Currency, Checkable Deposits, Travelers Checks

M2

•M1+Money Market Accounts, Savings Accounts, Mutual Fund Accounts

M3

•M2+Large CD’s (100,000+)