Fm Chapter 2

Front 1

Money

Back 1

an economic unit that functions as a generally recognized medium of exchange for transactional purpose in an economy.

a means of payment for goods and services or repayments of debts, serves as an asset to the holder.

Front 2

True

Back 2

t/f

in modern economy, money is not directly backed by intrinsic (underlying value), hence, the financial system works on an entirely fiduciary basis.

Front 3

• Medium of Exchange

• Measure of Value

• Store of Value

• Standard of deferred payments

Back 3

Role or Function of money in the economy:

Front 4

Medium of Exchange

Back 4

it is accepted freely in exhange for all other goods.

Front 5

True

Back 5

t/f

barter system is very inconvenient so the introduction of money has got over the difficulty of barter.

Front 6

Measure of Value

Back 6

money acts as a commin measure of value; it is a unit of account and a standard of measurement.

Front 7

True

Back 7

t/f

when we buy a good in the market, we pay a price for it in money; price is nothing but value expressed in terms of money.

Front 8

Store of Value

Back 8

money is a convenient form to store wealth.

Front 9

Standard of deferred payments

Back 9

it forms the basis for credit transactions.

if credit transactions were to be carried on the basis of commodities, there would be a lot of difficulties and it will affect trade.

Front 10

Money Supply (money stock)

Back 10

- the total value of money available in an economy at a point of time

- consist mostly of currency and demand deposits

- currency includes all coins and paper money issued by the government and the banks

Front 11

M1: Narrow Measure

Back 11

- yung pera hawak mo, very limited items- includes all currency (i.e. cash) in circulation, travelers checks, demand deposits at commercial banks (or other depository Institutions) held by the public and other checkable deposits

- it is often referred to as the narrowest measure of money supply.

- it refers primarily to money used as a medium of exchange

Front 12

M2: Intermediate Measure

Back 12

- yung pera nakastore

-includes everything in M1 as well as savings deposits & balances in retail money market funds.

- it refers primarily to money used as a store of value.

Front 13

M3: Brood Measure

Back 13

- includes everything in M2 as well as large time deposits, balances ininstitutional money market funds and term repurchase agreement.

Front 14

term repurchase agreement

Back 14

a contract which the vendor of a securityagrees to repurchase it from the buyer at an agreed price.

Front 15

M4: (L)

Back 15

includes everything in M3 this includes liquid and near liquid assets such as:

(1) short-term treasury bills,

(2) high grade commercial paper

(3) bank acceptance