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Chapter 10 – Money and Banking. Cutler – Economics . BELLRINGER. NO BELLRINGER THIS WEEK RESUMES NEXT WEEK. Section 1 – Money. The Three Uses of Money Medium of Exchange Unit of Account Store of Value 6 Characteristics of Money Durability Profitability Divisibility . Uniformity

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Presentation Transcript
bellringer
BELLRINGER

NO BELLRINGER THIS WEEK

RESUMES NEXT WEEK

section 1 money
Section 1 – Money
  • The Three Uses of Money
    • Medium of Exchange
    • Unit of Account
    • Store of Value
  • 6 Characteristics of Money
    • Durability
    • Profitability
    • Divisibility
    • Uniformity
    • Limited Supply
    • Acceptability
  • Sources of Money’s Value
    • Commodity Money
    • Representative Money
    • Fiat Money
three uses of money
Three Uses of Money
  • Money: anything that serves as a medium of exchange, unit of account, and a store of value
  • Three Uses of Money
    • Medium of exchange
    • Unit of account
    • Store of value
three uses of money1
Three Uses of Money
  • Medium of Exchange
    • Anything that is used to determine value during the exchange of goods and services
  • Alternative to a medium of exchange?
    • Barter: direct exchange of one set of goods or services for another
three uses of money2
Three Uses of Money
  • Money as a unit of account
    • Means for comparing the values of goods and services
    • Comparing prices between stores
three uses of money3
Three Uses of Money
  • Money as a store of value
    • Something that keeps its value if it is stored rather than used
    • You don’t have to spend every dollar you take in
    • You can put $ in savings and take it out when you need it at a later time
six characteristics of money
Six Characteristics of Money
  • Durability
  • Portability
  • Divisibility
  • Uniformity
  • Limited Supply
  • Acceptability
six characteristics of money1
Six Characteristics of Money
  • Durability
    • Using coins instead of wheat, olive oil, or other items that can disintegrate over time
    • Confused?
      • Dollar bills can easily be replaced…
      • Paper money can typically last at least a year in circulation
six characteristics of money2
Six Characteristics of Money
  • Portability
    • Ability to take money anywhere
    • Transfer from one person to the next
six characteristics of money3
Six Characteristics of Money
  • Divisibility
    • Breaking money up into smaller denominations
      • The $100 into 2 $50s or 5 $20s
      • Using a $20 to pay for something that is only $5
six characteristics of money4
Six Characteristics of Money
  • Uniformity
    • $1 is always $1
    • Dried fish as money?
      • How much is a dried fish worth?
      • Size of the dried fish
six characteristics of money5
Six Characteristics of Money
  • Limited Supply
    • Why isn’t sand valuable?
    • Federal Reserve controls the “SUPPLY” of money
six characteristics of money6
Six Characteristics of Money
  • Acceptability
    • People must be willing to take your money
sources of money s value
Sources of Money’s Value

Commodity Money

Representative Money

Fiat Money

sources of money s value1
Sources of Money’s Value
  • Commodity Money
    • Objects that have value in themselves and that are also used as money
sources of money s value2
Sources of Money’s Value
  • Representative Money
    • Objects that have value because the holder can exchange them form something of value
    • Giving someone and IOU
    • Gold or Silver Certificates
sources of money s value3
Sources of Money’s Value
  • Fiat Money
    • Money that has value because the government has ordered that it is an acceptable means to pay debts