Chapter 14 Money 3 Functions of Money Medium of Exchange - Barter System Unit of Accounting - Yardstick for comparison - Enables accurate financial records of debts/savings Store of Value - Defers purchases

Characteristics of Money Durable – Withstands wear and tear Portable – Easy to carry Divisible – Easily divided into smaller units Stable of Value – Store worth Scarce – Based on limited supply Accepted – Faith in payment

Types of Money Commodity – Good set aside for value Representative - Backed by something of value Fiat - Govt. backs value base on continuity Legal Tender – Must be accepted as legal payment

Overdraft Checking - Protection for exceeding existing funds Electronic Funds Transfer (EFT) – Payments made electronically. Automated Teller Machines (ATM) – Tellerless banking. Section 2 Terms

Types of Money Currency – Common means of exchange Token – Material worth less than face value. Checking Account - Money deposited and withdrawn by checks Demand or Checkable Deposits – Bank must pay amount requested Debit Card – Funds automatically withdrawn from checking account. Near Money - Not money, but can be converted easily

The Money Supply M1 – All Currency, checkable deposits, travelers checks M2 – M1 plus savings deposits, time deposits, small-denomination CD’s, money mkt deposits, money mkt mutual funds,