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13.1: The Functions of Money

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  • Learning Objective

    1. Identify the functions of money and describe the three government measures of the money supply.

    Finance is about money. So our first question is, what is money? If you happen to have one on you, take a look at a $5 bill. What you’ll see is a piece of paper with a picture of Abraham Lincoln on one side and the Lincoln Memorial on the other. Though this piece of paper—indeed, money itself—has no intrinsic value, it’s certainly in demand. Why? Because money serves three basic functions. Money is the following:

    1. A medium of exchange
    2. A measure of value
    3. A store of value

    Figure 13.1


    Money itself has no intrinsic value.

    401(K) 2012 – Money – CC BY-SA 2.0.