What does money as a unit of account mean?

Money as a unit of account means that money is divisible, countable, and fungible. Money is divisible because it can be subdivided into smaller units. It is countable because mathematical calculations can be made regarding money.

How do you define money?

Defining money is almost as tricky as defining love. It's something we use every day, but most people don't stop to think about what money is. Money is hard for most people to describe because, at its core, money is an idea. Conceptually, anything is considered money if it functions as: 3) a unit of account.

Why do we need a standard unit of account?

Indexes such as GDP and the CPI are so broad in their scope that compiling them would be impossible without a standard unit of account. After being compiled, these figures are often used to guide governmental policy; especially monetary and fiscal policy.

What is M1 money?

M1 – This category of money includes all physical denominations of coins and currency; demand deposits, which are checking accounts and NOW accounts; and travelers' checks. This category of money is the narrowest of the three, and is essentially the money used to buy things and make payments (see the "active money" section below). 7