1. Meaning of Money Money (money supply)—a generally accepted means of payment for goods, services or debts  Money is a stock …the stock of dollars in our wallets …the stock of credits in our bank accounts Wealth—the total of assets that store value  Money is one component of our wealth Income—the flow of earnings per unit time  We earn income.. we don’t “make money” (unless we’re counterfeiters)

2. Functions of Money … the usual suspects Medium of Exchange — promotes economic efficiency by minimizing the time spent buying things  Must be easily standardized … widely accepted … divisible … easy to carry … durable Unit of Account — measures value  Prices set / records kept / contracts made in money terms Store of Value —stores purchasing power  Most liquid of all assets  Yields no or minimal interest  Keeps its nominal value: $1 is a $1  Loses value during inflation

3. Evolution of the Payments System Commodity Money Fiat Money Checks Electronic Payment E-Money Measures of Money Stock Revisions are issued because:  Small depository institutions report infrequently Be concerned only with longer-run movements of money supply measures