Chapter 3 What is money?2021/6/161What is Money: DefinitionsMoney is the stock of assets that can be readily used to make transactions.1.2.Money is anything that is generally accepted in payment for goods and services2021/6/162What is Money(cont.)It is important to distinguish between money, wealth and income:nMoneyqStocknWealth: Money + AssetsqStocknIncome: earnings at a point in timeqFlowFlowStock2021/6/163Money: FunctionsnMedium of Exchangewe use it to buy stuffnStore of Valuetransfers purchasing power from the present to the futurenUnit of Accountthe common unit by which everyone measures prices and valuesMoney helps to:qLower transaction costsqIncrease Liquidity in an economy2021/6/164Evolution of Payments SystemnPrecious metals like gold and silver (commodity money)nPaper currency (fiat money)nChecksnElectronic means of paymentnElectronic money: Debit cards, Stored-value cards, Smart cards, E-cash2021/6/165What can serve as money?Commodities must satisfy the following properties to serve as money:nWidely acceptednStandardizednDivisiblenEasy to carrynNot deteriorate easily2021/6/166Classifications of MoneynIn the United States:qM1 = Currency + Travelers Checks + Demand Deposits + Other Checkable DepositsqM2 = M1 + Small denomination time deposits & repurchase agreements + Savings Deposits and money market deposit accounts + Money Market mutual fund shares (noninstitutional)qM3 = M2 + Large denomination time deposits and repurchase agreements + Money Market mutual fund shares (institutional) + Repurchase Agreements + EurodollarsNote: As of March 2006, the Fed has discontinued M32021/6/167Money supply measures, April 2009$8264M1 + small time deposits, savings deposits, money market mutual funds, money market deposit accountsM2$1592C + demand deposits, travelers checks, other checkable depositsM1$850CurrencyCamount ($ billions)assets includedsymbol2021/6/168Reliability of Money DataProblems arise because:nLack of frequency in reporting depositsnSeasonal variations Focus on long run monetary movements!2021/6/169 结束语结束语若有不当之处，请指正，谢谢！若有不当之处，请指正，谢谢！