Next Topic - Banking and the Expansion of the Money Supply

#AP Macroeconomics: Money and the Money Supply - The Night Before 🚀

Hey! Let's make sure you're feeling super confident for tomorrow's exam. We're going to break down everything about money and the money supply, keep it simple, and make it stick. Let's do this!

#What is Money? 🤔

Key Concept

Money isn't just about the cash in your pocket. It's anything that serves as a medium of exchange, a unit of account, and a store of value.

#Types of Money

Fiat Money: This is what we mostly use today—paper money and coins. It's money because the government says it is, not because it has any other inherent value. Think of it like a token. 🪙
Commodity Money: This has value in itself, like gold, silver, or even tobacco in some historical contexts. It's useful even if it's not used as money. 💰

#Functions of Money

These three functions are CRUCIAL. You'll see them in multiple choice and FRQs. Know them inside and out!

Memory Aid

M.U.S. - Medium of exchange, Unit of account, Store of value. Remember this acronym to recall the three functions of money.

#1. Medium of Exchange 🤝

Money makes transactions easy. Instead of bartering (trading goods directly), you use money to buy what you need. Think of it as a universal 'go-between'.
- Caption: Bartering is inefficient. Money simplifies transactions.

#2. Unit of Account 📏

Money provides a common way to measure value. It's how we know a diamond is worth more than a pencil. Prices are the key here. It's like a universal measuring stick for value.
- Caption: Money allows us to compare the value of different goods and services...

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Definition, Measurement, and Functions of Money