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CHAPTER 5: MONEY SUPPLY AND FEDERAL RESERVE SYSTEM (Characteristics of…
CHAPTER 5:
MONEY SUPPLY AND FEDERAL RESERVE SYSTEM
Definition of Money
Acceptable as a payment for goods and services
Anything that met a medium of echange
Characteristics of Money
STABLE IN VALUE
- money should be stable in the value
PORTABLE
- money should be easy to carry
SCARCITY
- the money should be scare and limited of supply
DIVISIBLE & STANDARDIZE
- money can be divide into smaller unit
RECOGNIZABLE
- everyone should know that the things it's a money
DURABLE
- money should be last long and not deteriorate easily.
Classification of Money
LEGAL TENDER
- paper money that be approved as a payment
TOKEN MONEY
- have a lower metallic value
FIAT MONEY
- issued by central bank and government declared to be money
COMMODITY MONEY
- used as payment and have value
DEMAND DEPOSITS
- money can be transferable by way of cheque
Function of Money
Unit of Account
- can be used to measured a goods and services
Means of Exchange- can buy goods and services with the money
Standard of Deferred Payment
- can used to pay later, buy now pay later, because the money is stable
Store of Value
- money can be one of financial assets because of store for wealth and as a saving in future
Types of Money
Notes
- can be used without any limit. Known as fiat money
Current Deposits
- known as demand deposits, sight deposit, bank and cheque deposit
Coins
- known as token money because it face value is grater that the metallic content of the coins.
Near Money
- consists of saving and fixed deposit at commercial banks.