Economics: Today and Tomorrow © 2012Chapter 14:
Money and BankingChapter OverviewsSection 1: The Functions and Characteristics of Money
All money serves three functions: a medium of exchange, a unit of accounting, and a store of value. Without money, people would have to barter, or exchange goods and services for other goods and services. There are six characteristics of money: durable, portable, divisible, stable in value, scarce, and accepted. Also, money can be one of three types: commodity money, representative money, or fiat money. Section 2: History of American Money and Banking
American banking has undergone many changes. After the American Revolutionary War, the nation’s new leaders had to decide on a banking system. Some supported a national banking system, while others argued for state-chartered banks. Today, we have both. The efficiency of banking services has increased as computer technology has reduced the dependence on paper. Section 3: Types of Money in the United States
The money supply consists of not only bills and coins but also checking and savings deposits and certain other liquid investments. Economists use both narrow and broad definitions of the money supply to measure the amount of money in circulation. M1 is the narrow definition and includes moneys that can be spent immediately and against which checks can be written. M2 is the broad definition and includes M1 plus near moneys, such as savings deposits and money market deposit accounts.  | 
