Business Definition for: money
money
- cash.
- term broadly used to refer to a medium of exchange and unit of value.
money
legal tender as defined by a government and consisting of currency and coin. In a more general sense, money is synonymous with
cash
, which includes negotiable instruments, such as checks, based on bank balances.
money
anything commonly accepted as a
legal tender
currency for payment of debts. Money has been defined any number of ways, but it generally serves three distinct purposes, depending on how it is used: (1) as a medium of exchange for payments between consumers, businesses, and government; (2) as a unit of account for measuring purchasing power, or the prices paid for goods and services; and (3) as a store of value for measuring the economic worth of current income deferred for spending in future years.
In the United States, paper currency (
federal reserve note
), coins, and checking account balances are examples of money. Other forms of money are commodity money (gold and silver bullion and coins, brightly colored shells and so on), and
barter
, the trading of goods and services without monetary exchange. Today, paper currency represents only a fraction of the nation's money supply; about threefourths of the
money supply
is held in the form of bookkeeping debits and credits representing demand deposit (checking) account balances in commercial banks.
See also
fiat money
,
M1
,
monetary base
,
money supply
,
M2
,
currency in circulation
,
near money
,
M3
money
coinage, currency, and other commodities recognized by members of an economy as being reliable stores of value and
media of exchange
.
Related Terms:
paper money that is backed only by the issuing government's decree that it is acceptable as legal tender currency. Its value stems from public confidence, rather than convertible into gold or other hard currency.
narrowest measure of the money supply. M1 includes currency held by the public, plus travelers' checks, demand deposits, other checkable deposits (including negotiable order of withdrawal (NOW) accounts, Automatic Transfer Service (ATS) accounts, and credit union share draft accounts).
sum of reserve accounts of financial institutions at Federal Reserve Banks, currency in circulation (currency held by the public and in the vaults of depository institutions). The major source of the adjusted monetary base is federal reserve credit. The monetary base, as the ultimate source of the nation's money supply, is controllable, at least to some degree, by Federal Reserve monetary policy. The adjusted monetary base data is compiled weekly by the Federal Reserve Board and the Federal Reserve Bank of St. Louis, and is adjusted seasonally.
total stock of money in the economy, consisting primarily of (1) currency in circulation and (2) deposits in savings and checking accounts. Too much money in relation to the output of goods tends to push interest rates down and push prices and inflation up; too little money tends to push interest rates up, lower prices and output, and cause unemployment and idle plant capacity. The bulk of money is in demand deposits with commercial banks, which are regulated by the Federal Reserve Board. It manages the money supply by raising or lowering the reserves that banks are required to maintain and the discount rate at which they can borrow from the Fed, as well as by its open-market operations-trading government securities to take money out of the system or put it in.
Changes in the financial system, particularly since banking deregulation in the 1980s, have caused controversy among economists as to what really constitutes the money supply at a given time. In response to this, a more comprehensive analysis and breakdown of money was developed. Essentially, the various forms of money are now grouped into two broad divisions: M-1, M-2, and M-3, representing money and near money; and L, representing longer-term liquid funds. The table on the next page shows a detailed breakdown of all four categories.
money supply measure that includes M1plus savings and small denomination time deposits, Money Market Demand Accounts, shares in Money Market Mutual Funds held by individual investors.
paper money and coins circulating in the economy, counted as part of the total money in circulation, which includes demand deposits in banks.
cash equivalents and other assets that are easily convertible into cash. Some examples are government securities, bank time deposits, and money market fund shares. Bonds close to redemption date are also called near money.
money supply measure that includes M2plus large time deposits, large denomination repurchase agreements, shares in Money Market Mutual Funds held by institutional investors, and certain Eurodollar deposits in foreign branches of U.S. banks.
Referring Terms:
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
