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Money

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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Money

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  1. Money

  2. 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

  3. 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

  4. 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

  5. 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)

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