Chapter 14 Section 3 Types of Money in the United States

What is money?  What do you consider to be money? Write down what you think money is and what some examples are of money. Hint think about what we discussed during our last day of notes.

Money  Money in use today consists of more than just currency. It also includes deposits in checking and certain types of savings accounts, plus certain other investments.

 M0 money supply. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all of the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 [source: Federal Reserve]. HamiltonFederal ReserveFederal ReserveHamiltonFederal ReserveFederal Reserve

 M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In July 2009, the M1 money supply for U.S. dollars equaled about $1,655.6 billion [source: Federal Reserve]. Federal ReserveFederal Reserve

 M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and small CDs. In July 2009, the M2 money supply was about $8,326.8 billion [source: Federal Reserve]. money market fundssavings accountsFederal Reservemoney market fundssavings accountsFederal Reserve

Types of Money  Currency – Printed money and coins.  Checking Accounts Debit Cards Debit Cards  Credit Cards ≠ Money (It’s a loan)

Near Moneys  Assets such as savings accounts, that can be turned into money relatively easy and without the risk of loss of value.

The Money Supply  The amount of “Money” in the United States.  What constitutes money is not completely agreed upon – two basic definitions are most widely accepted.

M1  M1 = All currency, and checkable deposits, and traveler’s checks (Narrow Definition) These are all things that can be spent immediately through cash or checks with no limits. These are all things that can be spent immediately through cash or checks with no limits.

M2  Includes all of M1 + near moneys such as savings accounts, small-denomination time deposits, money market deposit accounts, etc… (Broader Definition Think of it as M1 plus money that you could get relatively easy such as going to the bank and taking it out of your account. Think of it as M1 plus money that you could get relatively easy such as going to the bank and taking it out of your account.