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The Fundamentals of Money and Financial Systems by Shahdad Naghshpour

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CHAPTER 6

Forms of Money in the Economy

Types of Money

In the introduction, we pointed out that money has three properties. Money is a medium of exchange, a unit of account, and acts as a store of value. Next, we introduced the concept of what is considered money in modern economies. We also pointed out that there are several kinds of money with different levels of liquidity. Liquidity refers to the ease of spending different types of monetary assets. An asset is perfectly liquid if it can be converted to currency immediately, without any risk, loss of value, or cost. However, every type of money has some cost and risk compared to currency, as will become evident in this chapter. The complex economies that have developed since the Renaissance ...

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