- Medium of Exchange (trading or bartering)
- Unit of Account
- Store of Value
- Commodity Money: gets its money from the type of material it is made
- ex: gold or silver coins
- Representative Money: paper money backed by something tangible
- Fiat Money: money because the government says so
- type of money US uses
- Durability: money is able to hold up, withstand, last throughout transactions
- Portability: move it from place to place
- Divisibility: money can be broken down into smaller units
- Uniformity: each monetary unit must be identical
- Scarcity
- Acceptability
-75% of US money
-more liquid
- Currency (cash and coins)
- Checkable Deposits or Demand Deposits (checking accounts)
- Traveler's Checks
-25% of US money
- Savings Account
- Money Market Account
- Certificate Deposits (CD): deposits held by banks outside of the US
- M1 Money
assets = liabilities + net worth
assets: what you own
liabilities: what you owe
-Bank deposits are subject to a reserved requirement. Banks cannot keep all of their reserve and must give some back
Reserve Ratio = Commercial Bank's Required Reserves / Commercial Bank's Checkable-Deposit Liabilities
Important Issues
- Excess Reserves = Actual Reserves - Required Reserves
- Control of Lending Ability
Banks create money by lending excess reserves and destroy it by loan repayment. Purchasing bonds from the public also creates money
Maximum Checkable-Deposit Creation = Excess Reserves x Monetary Multiplier
It is an awesome blog, with the colors and customizations. However i would do some changes
ReplyDelete1. M2 money is not 25% of U.S. money, it is 25% of liquid money in U.S.
2. As it was shown in the earlier videos, commodity money is basically barter or a commodity that serves the porpose of money, while it is representative money which is backed by gold and silver as it "represents" the valuse of a currency based on those metals.
All in all, it a great blog though