Mr. Nunn

The Money Supply

Components of the Money Supply

• Money Supply-The total supply of money in circulation, composed of currency, checking accounts, and traveler’s checks.

Currency

• Currency- coins issued by the U.S. Treasury and paper money (called Federal Reserve notes) issued by the Federal Reserve System.

• Federal Reserve note- Paper money issued by the Federal Reserve System.

Checking Accounts

• Checking Accounts or demand deposits- an account from which deposited funds can be withdrawn in currency or transferred by a check to a third party at the initiative of the owner.

Traveler’s checks

• Traveler’s checks- is a check issued by a bank in any of several denominations and sold to a traveler (or anyone who wishes to buy it), who signs it at the time it is issued by the bank and then again in the presence of the person cashing it.

Near-Money

• Assets, such as non-checking savings accounts, that can be easily and quickly turned into money.

Some Types of Near-Money

• Saving Accounts- an interest earning account.

• Credit Cards

Borrowing, Lending, and Interest Rates.

• Loanable funds market- The market for loans. There is demand for loans (stemming from borrowers) and a supply of loans (stemming from lenders). It is in the loanable funds market where the interest rate is determined.