~MONEY~

Money- that is use to purchase goods and services.

Three uses of money

• Meaner of exchange to determine value.

• Unit of Account 
• compare prices

• Store Value
• how money can be store                                                                                                  

1.  Commodity Money: value within its self

• Salt
• olive oil
• gold

2.  Representative Money: Represents something of value

• IOU

3.  Fiat Money: Money because government says so 

• coins

Currency is money BUT not all currency is money

6 Characteristics of Money

1. Durability (last long)
2. Portability ( take it everywhere)
3. Divisibility (Broken down) ex(1 dollar is 10 dimes)
4. Uniformity (looks the same, updates)
5. Limited supply
6. Acceptability 

Money Supply

All the available money in the economy 

M1

• Total value of finical available in use economy
• Liquid assets (easily to convert to cash)
• Crash
• Paper Currency
• coin
• check-able deposits or demand deposits  (checks or checking account)
• Travelers Checks

M2

• Consists of M1 Money
• Savings Accounts 
• money market accounts. 

Financial Institutions

1. Store Money
2. Save Money
3. Loan Money(Credit card)

Save Money

• Savings Account
• Checking Account
• Money Market Account
• CD certificate of Deposit

Loan

• Banks operate on reserve system which where they keep their fraction of the fund and loan out the rest.

Interest Rate

• Principal:amount of money borrowed
• Interest: price paid for the use of borrowed money
• simple interest: paid on the principal
• compound interest: paid on the principal and Interest

Formulas
P- Principal
R- rate of interest
T- time
Simple Interest
I= P x R x T/ 100
Time
T= I x 100/ P x R
Principal
P = I x 100/ R x T
Interest Rate
R = I x 100/ P x T
Types of financial Institutions

1. Commercial banks
2. loans and saving institutions
3. mutual savings banks
4. credit unions
5. financial companies