what three stages does the currency system define? course hero

What was the basic money supply before 1980?

Before 1980, the basic money supply was measured as the sum of currency in circulation, traveler’s checks, and checkable deposits. Currency serves the medium-of-exchange function very nicely but denies people any interest earnings. (Checking accounts did not earn interest before 1980.)

What is the third function of money?

The third function of money is to serve as a store of value, that is, an item that holds value over time. Consider a $20 bill that you accidentally left in a coat pocket a year ago. When you find it, you will be pleased. That is because you know the bill still has value.

What are the different types of money?

Although money can take an extraordinary variety of forms, there are really only two types of money: money that has intrinsic value and money that does not have intrinsic value. Commodity money is money that has value apart from its use as money.

What is the basic money supply of the United States?

However, the items that provide this function have varied over time. Before 1980, the basic money supply was measured as the sum of currency in circulation, traveler’s checks, and checkable deposits. Currency serves the medium-of-exchange function very nicely but denies people any interest earnings.

What three stages does the currency system define?

They have three levels: (1) the holders of money (the “public”), which comprise individuals, businesses, and governmental units, (2) commercial banks (private or government-owned), which borrow from the public, mainly by taking their deposits, and make loans to individuals, firms, or governments, and (3) central banks, ...

What are the 3 functions of money?

To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange.

What is currency and its use in an economy?

Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper or coins, usually issued by a government and generally accepted at its face value as a method of payment.

What are the 4 types of money?

The 4 different types of money as classified by the economists are commercial money, fiduciary money, fiat money, commodity money.

What are the 3 types of money?

Economists differentiate among three different types of money: commodity money, fiat money, and bank money.

What are the 3 functions of money quizlet?

The three functions of money are: Medium of exchange, unit of account, and store of value.

What are types of currency?

List of major world payment currenciesRankCurrencyCurrency1United States dollarUnited States dollar2EuroEuro3Pound sterlingPound sterling4Japanese yenJapanese yen9 more rows

What defines currency value?

Summary. Currency value is determined by aggregate supply and demand. Supply and demand are influenced by a number of factors, including interest rates, inflation, capital flow, and money supply. The most common method to value currency is through exchange rates.

How many types of currency are there?

There are 180 currencies recognized as legal tender in United Nations (UN) member states, UN observer states, partially recognized or unrecognized states, and their dependencies.

What are the stages of evolution of money?

Money has evolved through different stages according to the time, place and circumstances. Some of the major stages through which money has evolved are as follows: (i) Commodity Money (ii) Metallic Money (iii) Paper Money (iv) Credit Money (v) Plastic Money.

What are the three main types of money discussed in our reading?

Commodity, Fiat, Commercial Bank Money.

What is M0 M1 M2 M3 M4?

The total stock of money in circulation among the public at a particular point of time is called money supply. The measures of money supply in India are classified into four categories M1, M2, M3 and M4 along with M0.

What was the basic money supply before 1980?

Before 1980, the basic money supply was measured as the sum of currency in circulation, traveler’s checks, and checkable deposits. Currency serves the medium-of-exchange function very nicely but denies people any interest earnings. (Checking accounts did not earn interest before 1980.)

What is the function of money?

Money serves three basic functions. By definition, it is a medium of exchange. It also serves as a unit of account and as a store of value —as the “mack” did in Lompoc.

How does barter work?

We can understand the significance of a medium of exchange by considering its absence. Barter occurs when goods are exchanged directly for other goods. Because no one item serves as a medium of exchange in a barter economy, potential buyers must find things that individual sellers will accept. A buyer might find a seller who will trade a pair of shoes for two chickens. Another seller might be willing to provide a haircut in exchange for a garden hose. Suppose you were visiting a grocery store in a barter economy. You would need to load up a truckful of items the grocer might accept in exchange for groceries. That would be an uncertain affair; you could not know when you headed for the store which items the grocer might agree to trade. Indeed, the complexity—and cost—of a visit to a grocery store in a barter economy would be so great that there probably would not be any grocery stores! A moment’s contemplation of the difficulty of life in a barter economy will demonstrate why human societies invariably select something—sometimes more than one thing—to serve as a medium of exchange, just as prisoners in federal penitentiaries accepted mackerel.

Why did Iraq change its currency?

After the Gulf War, the northern, mostly Kurdish area of Iraq was separated from the rest of Iraq though the enforcement of the no-fly-zone. Because of United Nations sanctions that barred the Saddam Hussein regime in the south from continuing to import currency from Switzerland, the central bank of Iraq announced it would replace the “Swiss” dinars, so named because they had been printed in Switzerland, with locally printed currency, which became known as “Saddam” dinars. Iraqi citizens in southern Iraq were given three weeks to exchange their old dinars for the new ones. In the northern part of Iraq, citizens could not exchange their notes and so they simply continued to use the old ones.

What is money in basketball?

Money, ultimately, is defined by people and what they do. When people use something as a medium of exchange, it becomes money. If people were to begin accepting basketballs as payment for most goods and services, basketballs would be money.

What is the most widely used form of money?

Gold and silver are the most widely used forms of commodity money. Gold and silver can be used as jewelry and for some industrial and medicinal purposes, so they have value apart from their use as money. The first known use of gold and silver coins was in the Greek city-state of Lydia in the beginning of the seventh century B.C. The coins were fashioned from electrum, a natural mixture of gold and silver .

How does money differ from other stores of value?

Money differs from these other stores of value by being readily exchangeable for other commodities. Its role as a medium of exchange makes it a convenient store of value. Because money acts as a store of value, it can be used as a standard for future payments.