AP Macroeconomics Flashcards: Definition, Measurement, and Functions of Money
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 11 cards to help you master important concepts.
What are the two components of the monetary base (M0/MB)?
The monetary base is composed of two parts: currency in circulation and bank reserves.
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What are the two components of the monetary base (M0/MB)?
The monetary base is composed of two parts: currency in circulation and bank reserves.
What is the definition of money?
Money is any asset that is accepted as a means of payment.
Which measures of money are distinct from the monetary base?
The monetary aggregates M1 and M2, which measure the money supply, are distinct from the monetary base (M0/MB).
What is the 'store of value' function of money?
This function allows money to be held and used for purchases in the future, retaining its value over time.
What is the 'unit of account' function of money?
This function means money provides a common measure of the value of goods and services.
If you are asked to calculate a measure of money using data, what are the primary measures you might be asked to find?
Based on the core definitions, you would likely be asked to calculate one of the monetary aggregates (M1 or M2) or the monetary base (M0/MB).
What are the three functions of money?
Money serves as a medium of exchange, a unit of account, and a store of value.
How is the money supply measured?
The money supply is measured using monetary aggregates, which are designated as M1 and M2.
What is the 'medium of exchange' function of money?
This function means that money is widely accepted as a method of payment for goods and services.
What is the monetary base?
The monetary base (also known as M0 or MB) is a measure of money that includes currency in circulation and bank reserves.
What are M1 and M2?
M1 and M2 are specific classifications, or monetary aggregates, used to measure the total amount of money within an economy.