Exploring Financial Assets and Functions of Money

Jacob Clifford introduces financial assets in macroeconomics, discussing the functions of money, types of money including commodity and fiat money, and the concept of money supply and liquidity. He explains the differences between stocks and bonds, and the inverse relationship between interest rates and bond prices. The video concludes with a review of key concepts and a pop quiz.

What are the three functions of money?

• Medium of exchange, unit of account, and store of value

• Payment method, investment, and savings

• Currency, stocks, and bonds

• Digital, physical, and exchange

What is commodity money?

• Money with no intrinsic value

• Government-issued currency

• Money that has intrinsic value

• Digital currency

What is fiat money?

• Currency backed by gold

• Money with intrinsic value

• Money whose value is based on government decree

• Digital currency only

What is a characteristic of commodity money?

• It has no intrinsic value

• It can be used for other purposes beyond being a medium of exchange

• It is only digital

• It is always issued by the government

What does M1 money supply include?

• Currency in circulation and checkable deposits

• Money market funds

• Savings accounts and CDs

• Stocks and bonds

What does M2 money supply include?

• Cryptocurrencies

• Stocks and real estate

• M1 plus savings accounts, CDs, and money market funds

• Only physical currency

What is the relationship between interest rates and bond prices?

• Directly proportional

• Inversely proportional

• No relationship

• Only affects stocks

What is not considered money?

• Traveler's checks

• Real estate

• Funds in your checking account

• Cash in your wallet

What represents ownership in a company?

• Savings accounts

• Stocks or equities

• Bonds

• Fiat money

Why might someone prefer to own stocks over keeping all their money in a checking account?

• Stocks have lower risk

• Stocks can potentially earn more in the future

• Stocks are considered money

• Stocks have a fixed interest rate