Explain the basic functions and characteristics of money, and describe the composition of the money supply in the United States

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Money has taken many forms through the ages: shells, wheels, beads and even cows. All forms, though, have always had three things in common. Find out what in this eight-minute episode of our Economic Lowdown Podcast Series. You will also learn how commodity money differs from representative money and how both differ from today's fiat money.

The basic functions of money are related to its being a unit of measurement, an instrument of exchange and store of values.

What is the money supply?

It corresponds to all the currency present in the economy of a given country, that is, the amount of money present in the form of cash and deposits.

Therefore, money is an essential instrument of a country's economy, where money is also used in the form of credit and loans, helping economic development.

AI generated Answer

Quick Answer: Money serves as a medium of exchange, unit of account, and store of value and is composed of currency, deposits, and other liquid assets. Full Explanation: Money serves three primary functions in an economy - it acts as a medium of exchange, a unit of account, and a store of value. A medium of exchange is a tool that enables the purchase of goods and services. In modern societies, money is mainly composed of coins and paper money, which are both forms of currency. The unit of account function of money allows for pricing, comparing and measuring the value of goods and services, while the store of value feature allows people to save and accumulate wealth. In the United States, the money supply is composed of three main components: currency (paper money and coins), demand deposits (money held in checking accounts), and other liquid assets (short-term financial instruments such as Treasury bills). Currency makes up the largest portion of the money supply, followed by demand deposits. The other liquid assets make up the remaining portion of the money supply.
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