Econ Chapter 10

What are the 3 uses of money?

medium of exchange, unit of account, store of value

Medium of Exchange

anything that’s used to determine value during the exchange of goods and services (buying something)

Unit of Account

a means for comparing the values of goods and services

Store of Value

something that keeps its value if it is stored rather than used

Currency

the coins and paper bills used as money in a society

The _________ is the world’s currency

US dollar

The US dollar is backed by _____

trust

What are the 2 types of sources of money’s value?

commodity money and fiat money

Commodity Money

consists of objects that have value in themselves

Examples of Commodity Money

gold and silver

Does commodity money have intrinsic value?

yes

Fiat Money

has value bc the government claims that it is an acceptable means to pay debts (legal tender)

Examples of Fiat Money

all currencies in the world

Does fiat money have intrinsic value?

no

M1

a way of measuring money supply that consists of assets that have liquidity, which is the ability to be used as or converted into cash

Components of M1 includes what 3 things?

all currency, traveler’s checks, and demand deposits

Demand deposits

the money in checking accounts

Money Supply

all the money available in the US economy