Unit 7 (Chapter 1-5)

Study Notes on Money and Financial Institutions

Page 1: Overview of Money

1. Importance of Using Money

• What is Money?

  • Money is defined as anything acceptable for exchanging goods and services.

  • It facilitates the medium of exchange and values goods and services.

  • The phrase "money is what money does" indicates that anything can serve as money if it fulfills certain functions.

2. Functions and Characteristics of Money

• Liquidity and Liquidity Preference Theory

  • Liquidity refers to how easily something can be turned into cash without losing its value.

  • Examples:

  • Cash: Highly liquid