4.3 Definition, Measurement, and Functions of Money

a. Define money and its functions. b. Calculate (using data as appropriate) measures of money.

• Money is any asset that is accepted as a means of payment.
• Money serves as a medium of exchange, unit of account, and store of value.
• The money supply is measured using monetary aggregates designated as M1 and M2.
• The monetary base (often labeled as M0 or MB) includes currency in circulation and bank reserves.
• Enduring understanding MEA-3: Money makes it possible to compare the value of goods and services, and interest rates provide a measure of the price of money that is borrowed or saved.