Money

I. What are the three uses of money?

1. A medium of exchange (to barter/ trade)
2. Unit of account (establishes economic worth in the exchange process)
3. Storage value (money holds its value over a period of time)

II. What are the three types of money? 

1. Commodity money (gets its value from the type of material from which it is made)
2. Representative money (paper money backed by something tangible that gives it value) 
3. Fiat money (type of money used in US. It is money because the government says so)

III. Characteristics of money

1. Portable 
2. Durable
3. Divisible 
4. Limited supply 
5. Acceptable 
6. Uniform

IV. Money supply 

• M1 money: consists of currency in circulation, checkable/ demand deposits (checking account), and travelers' checks. ( accounts for about 75%) held as a medium of exchange. "Most liquid" 
• M2 money: consists of M1 money, savings accounts, money market accounts, and deposits held by banks outside of the US
• M3 money: consists of M2, certificates of deposits