Payments system the method of conducting transactions

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Payments system : the method of conducting transactions in the economy; not only must it meet criteria, but it must work in the system efficiently - Commodity money : money made of precious metal; gold - Fiat money : paper money used to represent some commodity; instead of lots of copper, you can use bills as a medium of exchange; must have trust and authentication; value comes from gov’t by decree - Checks : so you don’t have to carry money but not legal tender; just a representation; instruction to institution to transfer $ from your account; diminishing per use - Electronic payments : paying bills - Debit cards : e-money - Credit card : more like a loan; sale - $100 paid w/ credit card, vendor accepts payment of $97 – willing to accept 3% charge; lots of vendors don’t want to do AmEx b/c it’s a separate and additional charge Measuring Money Monetary aggregates : measures of money supply M1 = currency in the hands of the public + demand deposits + travelers’ checks + other checkable deposits M2 = M1 + small denomination time deposits + savings deposits + money market
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1/29/13 deposit accounts + retail money market mutual funds M3 = DISCONTINUED Money supply (= currency + DDA) vs. Monetary base (= currency in circulation + Reserves held at the banks)
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Payments system the method of conducting transactions in...

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