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Money - PowerPoint PPT Presentation


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Money. 3 Uses of Money. Medium of Exchange Determines value during an exchange for goods or services Barter- Direct Exchange of goods in traditional economies Unit of Account Compares Values of Goods Prices vs. Value Storage of Value Hold for future use

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3 uses of money
3 Uses of Money
  • Medium of Exchange
    • Determines value during an exchange for goods or services
    • Barter- Direct Exchange of goods in traditional economies
  • Unit of Account
    • Compares Values of Goods
    • Prices vs. Value
  • Storage of Value
    • Hold for future use
    • Inflation?- money saved looses its value in times of high inflation
characteristics of money
Characteristics of Money
  • Durability
    • Must withstand daily physical wear and tear
  • Portability
    • Must be able to take and carry easily
  • Divisibility
    • Must be able to easily divide money into smaller denominations
slide4

Uniformity

    • People must be able to count and measure money equally and accurately. Money must be the same to everyone in an economic system.
  • Limited Supply
    • To maintain its value, money must be in short supply.
  • Acceptability
    • Buyers and sellers must continue to accept money and have faith in its value in order for exchanges to occur.
  • Currency = paper money and coins
sources of value
Sources of Value
  • Commodity of Value
    • Objects that have value, can be used as money
    • Diamonds, wheat, cattle, gold
  • Representative
    • Holders can exchange for something of value
    • I.O.U., paper receipt of gold/silver
  • Fiat
    • Money is valuable because the government says so
    • Legal Tender (American currency)