{"lesson":{"ID":"1847354075356725248","description":"","name":"4.3 Definition, Measurement, and Functions of Money","objectives":[],"sections":[{"content":"There are three primary functions of money within the economy.\n

\n|Medium of Exchange|: Money is used to facilitate transactions by providing a universally accepted means of payment. Instead of bartering goods and services directly, money allows people to buy and sell using a common standard.\n

\n|Unit of Account|: Money provides a consistent measure of value, which simplifies the process of comparing prices and valuing goods and services. It helps in setting prices and making economic decisions.\n

\n|Store of Value|: Money preserves value over time, allowing individuals to save and defer consumption. For money to effectively store value, it needs to maintain relatively stable purchasing power.","header_size":1,"name":"Functions of Money","section_type":0},{"content":"|Commodity Money|: Money that has intrinsic value due to the material it is made of (e.g., gold or silver coins). Its value is derived from its use as a commodity.\n

\n|Commodity-based Money|: Money that does not have intrinsic value, but has a fixed exchange rate to a certain material that has a standardized value. (e.g. the gold standard)\n

\n|Fiat Money|: Money that has no intrinsic value but is accepted as legal tender because of government decree. (e.g. most modern-day currencies)\n","header_size":1,"name":"Types of Money","section_type":0},{"content":"Not all money is made equal. There are three categories of money that vary in liquidity, called |money aggregates|.\n

\n|M1|: This includes the most liquid forms of money, such as physical currency (coins and paper money) and demand deposits (checking accounts). M1 represents the money that is immediately available for any transaction.\n

\n|M2|: This includes all of M1 as well as other assets that are less liquid but can be quickly converted into cash, such as savings accounts, money market mutual funds, and certificates of deposit (CDs) under 100,000$.\n

\nKeep in mind that credit is not part of either of these, as it is not considered money.\n

\nThese |Money Aggregates| added together form the |Money Supply|, or the total amount of money in circulation within the economy. Additionally, there is **M0 or MB**. Also called the monetary base, it includes all the currency in circulation as well as bank reserves.\n

\nUnderstanding money and its functions is crucial for analyzing how it affects economic activities, including inflation, interest rates, and overall economic stability.\n","header_size":1,"name":"Classifications of Money","section_type":0},{"content":"","header_size":1,"name":"","section_type":0}],"unit_id":"1847354075012792320"},"status":"success"}

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