Chapter 13 Outline
A. Money's Functions
1. Money serves as a unit of account.
a. This allows the value of many different types of goods and services to be compared.
2. Money serves as a medium of exchange.
a. A medium of exchange is something that can be used to purchase goods and services and pay debts.
b. When money functions as a medium of exchange, goods and services can be exchanged without resorting to barter.
3. Money serves as a store of value.
a. Money is a way for households to store their savings.
B. The Money Supply
1. Money is anything generally accepted as final payment for goods, services, and debt.
2. The nation's money supply is defined as currency, travelers' checks, demand deposits, and other checkable deposits.
a. Other checkable deposits is the largest component of the money supply.
b. This definition of the money supply is referred to as M1.
3. Other definitions of the money supply are M2, M3, and L.
a. These money supply definitions are broader.
C. The Federal Reserve
1. The Federal Reserve is the United States' central bank.
a. A central bank is a government established agency that controls the nation's money supply, conducts monetary policy, and supervises the nation's monetary system.
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