| Chapter 13 Outline |
| IV. MONEY AND THE MONEY SUPPLY |
| 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. |