ECON 2020 Ch. 17

medium of exchange, unit of account, store of value

3 functions of money

double coincidence of wants

When two parties each hold an item the other wants; necessary for barter

medium of exchange

What people trade for goods and services

commodity money

A type of money that has intrinsic value; is a commodity

commodity-backed money

A type of money that represents a physical commodity, giving it inherent value.

fiat money

Money that has no intrinsic value and is not backed by a physical commodity; only a medium of exchange

unit of account

A standard measure that provides a consistent measure for the value of goods and services, allowing for comparisons and accounting

store of value

Retains value over time, enabling individuals to save and store wealth

cryptocurrency

Digital or virtual currency that uses cryptography for security and operates on decentralized technology like blockchain

checkable deposits

Bank deposits that are withdrawn via checks

M1

Measure of money supply; consists of currency and checkable/savings deposits

M2

Measure of money supply; includes M1 plus small time deposits and retail money market funds

currency + deposits

M (money supply) =

borrowed funds

Credit cards aren’t included in total money supply because they are ___

commercial banks

Institutions that take in deposits and extend loans