Econ 1BB3 Lecture Note February 14 , 2013 th
Question: Is my MasterCard an asset?
Money: An asset regularly used to buy goods and services
Money has 3 functions:
1. Medium of Exchange
2. Unit of Account
3. Store of Value
Liquidity: The ease with which an asset can be converted into the economy’s
medium of exchange.
-When prices rise, the value of money falls
Q: Which list ranks assets from most to least liquid?
A) Currency, fine art, stocks
B) Currency, stocks, fine art
C) Fine art, currency, stocks
D) Fine art, stocks, currency
Why? Stocks are more liquid then fine art because you have to find a buyer for fine
art. For stocks, you can simply call your stock breaker to convert them into medium
Commodity versus Fiat Money
Commodity Money: Money that takes the form of a commodity with intr