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Unit 6: Money - Coggle Diagram

- - - - currency is declared legal tender by a government, which in turn boost the confidence of using the currency.
    - - money derives it value from its scarcity relative to its utility.
    - - by virtue currency and checkable deposits are accepted as medium of exchange.
  - - - the amount of a currency will vary inversly to the price level, wehen the consumer price index or cost of living goes up the value of the currency goes down.
      - value = 1/ price level expessed as an index number
      - Inflation and acceptability. inflation that is high can significantly decrease the value money between time it is received and time it is spent. counties with hyperinflation can adopt a foreign currency as its own to counter the hyperinflation.
- - - - Checkable deposits in commercial bank savings
        
        The safety and convenience of chacks has made checkable deposits a large component of M1 money. checkable deposits can be converted into paper money and coins.
        
        Commercial banks a primary depository institutions. these intuitions is supplemented by thrift institutions . they are intuitions like savings and loan associations mutual saving banks and credit unions.
      - Currency in the hands of public
        
        Coins and Paper money: most currencies consist of coins and paper money. most money is issued by central banks of governments. it is referred to as token money
      - Excluded is all the money that is held by the treasury commercial banks and other institutions also exclude is checkable deposits held by governments or the reserve bank..
    - - by definition it includes all money from M1 as well as near monies. it includes three categories of near monies.
        
        NEar monies is certain high Liquid financial assets that do not function directly or fully as a medium of exchange, but can be converted into currency.
        
        Money Market mutual funds held by individuals.
        
        mutual funds that invest in short term securities. depositors can invest a minimum amount or more against their accounts.
        
        Small denominated time deposits.
        
        Funds become available at maturity, usually comes with a penalty if the money is withdrawn earlier than the specified time.
        
        Savings deposits
        
        a depositor can easlily withdrraw from the account into a check account.