The document discusses money and banking. It defines different types of money like commodity money, representative money, and fiat money. It also lists the roles of money as a medium of exchange, store of value, and unit of account. The document then discusses what makes money valuable, such as being widely accepted and durable. It defines the different measures of money supply as M1, M2, and M3. M1 is the most liquid transactions money. Finally, it introduces how banks work by using deposits to make loans and provides an example of calculating the money supply using the simple money multiplier formula.

1. Chapter Money & Banking 14

2. Objectives: list the types of money identify the characteristics of money list the 3 basic ways economists measure the money supply calculate how the money supply grows using the simple money multiplier

3. Types of Money Money: item used to buy goods and services Commodity Money: money with an alternative use Representative Money: money backed by something valuable Fiat Money: money that is valuable because the Government backs it Legal Tender: paper money and coins used within a nation

5. Roles of Money: Medium of Exchange: way of buying stuff Store of Value: holds the same value over time Unit of Account: consistent way of understanding prices

6. What makes Money Valuable? Widely Accepted Holds Value Durable Portable Divisible

8. The Money Supply M1 + M2 + retirement accounts and other assets that are difficult to convert to cash Even less liquid M3 M1 + savings accounts Broader measure M2 Currency in circulation and traveler’s checks Transactions money-liquid assets M1 Example Definition Type of Money

9. How Banks Work Banks use your deposited money to make loans

10. Simple Money Multiplier: = Deposit Required Reserve SMM SMM x Excess Reserve = $

11. SMM Example: = $100 20 5 5 x $80 = $400