Money Defined
Money
Generally accepted for goods and services.
Medium of Exchange
Usable for buying and selling goods and services.
Inflation
Occurs when the money supply grows to quickly.
Purchasing Power
Value function.
Currency
Standardized medium of exchange issued by the government.
Monetary Units
Used as a yardstick to measure the relative worth of a wide variety of goods, services, and resources.
Recession
If there is too little money.
Time value of money
Money received today it has a higher value the money received in the future.
Russian Ruble Crisis
People stopped using the official ruble in exchange for goods and services due to a lack of faith and more worthwhile forms of exchange, such as vodka.
Gauge
We can gauge the value of objects better with money.
Commodity money
Money that has some other use other than being a medium of exchange, a unit of account, and a store of value.
Compound Interest
Interests earned on the principal plus interest.
Legal Tender
Assets accepted for repayment of debt to the government, as well as private transactions, etc.
Money v Barter
Money allows society to escape the complications of barter.
Money Must be
Easily standardized so prices of two units can be compared, Divisible, Portable, Physically durable, Broadly in demand.
M1
The narrowest definition of the money supply is M1. It consists of two components: Currency in the hands of the public.
Dollarization
The situation in which market participants use another country’s currency as a means of exchange. (Like Costa Rica, which uses USD)
Specialization
Money enables society to gain the advantages of geographic and human specialization.
Cigarettes
Used by prisoners as currency.
M2
Currency and checkable deposits.