M0, M1, M2. Mrs. Eskra . OBJECTIVES: What will you learn?. Money is anything that serves as a medium of exchange, store of value, and unit of account. We can classify money according to how liquid it is. M0 M1 M2
Money is anything that serves as:
Most people probably tend to think of bills and coins when they hear the word “money.”
If money is anything that allows to get what we want, isn’t it also checks and debit cards? What else is it?
Some forms of money, like cash, are very easy to go out and spend right now.
Others, like money in our savings count, involve a few more steps to be able to spend.
This is known as liquidity.
The narrowest definition of money,
includes only the stock of
I don’t know about you, but I very rarely have much cash on me!
Needed cash to pay my neighbor
for Girl Scout cookies.
Includes demand deposits
(checking account balances) + M0 (stock of physical currency).
You can swipe your debit card almost everywhere now and immediately purchase something.
I could not use a debit card to buy Girl Scout Cookies but I probably could have written her a check.
Time deposits + M1
(demand deposits +
stock of physical currency).
After Christmas, I needed to transfer some money from savings into checking to pay my credit card bills.
This involved additional steps, so this money is not as “liquid.”