AP Macroeconomics / Unit 4: Financial Sector
4.3 Definition, Measurement, and Functions of Money
Notes
Money is a medium of exchange, unit of account and store of value.
- M1: currency, checkable deposits, savings deposits. M2: M1 plus small time deposits and money market funds.
- Fiat money has value because of government decree and trust.
Practice
Using money to compare prices of different goods is its function as a:
A common measure.
Which is in M1?
Highly liquid.
Saving cash in a drawer to spend next year uses money as a:
Holds value over time.
Ready for more? Take the Unit 4 test.