ECN 302 Study Guide - Midterm Guide: Risk Premium, Money Supply, Open Market Operation
3 Dec 2014
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In economics money refers to specifically to assets that are widely used and accepted as payment. Money has three useful functions in an economy. Money permits people to trade at less cost in time and effort. Money is the basic unit for measuring economic value. In most countries economists and policymakers use several different measure of the money stock. The most narrowly defined official money measure, m1, consist primarily of currency and balances held in checking accounts. More precisely, m1 is made up of currency and travelers checks held by the public and transaction accounts that allow depositors to write checks, transfer funds to other accounts and use atms and debit cards. Everything in m1 plus other assets that are somewhat less money like to compose m2. The main additional assets in m2 include savings deposits, small denomination time deposits, noninstitutional holdings of money market mutual funds and money market deposit accounts.
