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Understanding Money and Its Functions in the U.S. Economy

Learn about paper money, Federal Reserve notes, United States notes, and the process of exchanging unfit money in the financial system. Discover the functions of money and how it impacts daily transactions.

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Understanding Money and Its Functions in the U.S. Economy

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    1. $$$MONEY$$$ PLVS FALL 2007

    2. AMERICANS SHOULD KNOW What happens to money that is torn or worn? What is the difference between a Federal Reserve note and a United States note? What are the functions of money?

    3. FUNCTIONS OF $$$$ Medium of exchange (acceptable by all) Store of value (savings) Unit of account (compare prices) Standard of deferred payment (claim on goods/services that can be exercised now or later)

    4. PAPER MONEY All paper money regardless of issue date is still legal tender

    5. Federal Reserve Notes 99% of our money Current Denominations: $1, $2, $5, $10, $20, $50, $100 Before 1945: $500, $1,000, $5,000, $10,000 July 14, 1969—Denominations of $500 and larger were retired Treasury seal & serial numbers are green

    6. United States Notes Make up less that 1% of currency Since 1969, only $10 denominations have been issued. Prior to 1969, $2 and $5 were issued. 1966, $2 discontinued 1968, $5 discontinued Treasury seal and serial numbers are printed in red.

    7. UNFIT MONEY Average life of $1 bill is 17-18 months Larger denominations usually last longer Old, worn, torn, or soiled money is sent to the Federal Reserve Bank to be exchanged for new

    8. FEDERAL RESERVE Receive $ from commercial banks and others Decides if it is fit or unfit Fit is stored Unfit is destroyed by machines that shred it to 1/16 of an inch About 1/3 are unfit

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