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What is Money? zMoney is a medium of exchange zMoney is a unit of account zMoney is a store of value or wealth
Liquidity refers to two properties of assets or stores of value, namely: The ready convertibility of the asset to generalized purchasing power. The comparative safety of the asset. Money is the most liquid asset available under normal circumstances
Least liquid Most liquid Currency, checkable deposits Savings and time deposits Treasury bills, commercial paper Government and corporate bonds, equities Specialized equipment Ceramics, art, rugs, rare coins Farmland, commercial real estate Home equity
Depository institutions are required by law to hold a minimum fraction of their liabilities on account at the FED Legislation: Federal Reserve Act of 1913 DIDMCA of 1982
Banks create money when they credit the checking accounts of loan recipients. The ability of banks to make loans, and thereby expand the money supply, depends on their reserve position.
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