31.pdf - The function of money Medium of exchange usable for buying and selling goods Unit of account measure for the relative worth of a wide variety

31.pdf - The function of money Medium of exchange usable...

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The function of money Medium of exchange: usable for buying and selling goods Unit of account: measure for the relative worth of a wide variety of goods, services, and resources Store of value: enables people to transfer purchasing power from the present to the future Liquidity: ease at which it can be converted quickly into the mist widely accepted and easily spent form of money, cash, with little to no loss of purchasing power Components of Money Supply M1 Currency: Coins and Paper Money Checkable deposits: thrift, deposits in comercial banks M1= currency + checkable deposits M2 Savings deposits: savings account in a bank MMDA: interest bearing account containing a variety of interest-bearing short term securities Small denominated time deposits: CDs; mature over time, can be withdrawn when mature, can cash in at any time but has to pay a severe fee MMMF: combined funds of individual share holders to buy interest-bearing short- term credit instruments such as certificates of deposit, and U.S. government
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