a) Identify and explain the three functions of Money. b) What comprises the M1 definition of...

a) Identify and explain the three functions of Money.

b) What comprises the M1 definition of money?

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Expert Solution

Ans .

a)3 functions of money are -

Medium of exchange - money is used as a medium of exchange meaning that you can buy goods and services in exchnage of money.
Store of Value - money in nature can be saved , stored or retrieved any time and can be used as a medium of exchange at that time when it is being retreived , also there should be stability in the value of money overtime.
Unit of Value - It act as a measurement tool for judging the market value of good and services and all other transactions.

b) M1 - it is a narrow measure of supply of money which is made up of currencies which are physical and coins , checkable and demand deposits , NOW ( negotiable order of withdrawal ) accounts and travelers checks , it mainly holds all the money portion which have high liquidity in nature , thatswhy it mostly comprises of assets and currency which have high conversion with cash .

Note - Currency and coins in circulation are the biggest and largest components of M1.

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Rahul Sunny answered 2 months ago

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