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Objectives: Describe the three uses of money. Explain the six characteristics of money. Understand the sources of money’s value.
Key Terms Money Medium of exchange Barter Unit of Account Store of Value Currency Commodity Money Representative Money Flat Money
What do you know about Money? Make a short list of what you know about money. Can you name all 12 Americans who have been honored by Congress by having their image and name placed on paper currency? (hint: they’re all old, and dead) Watch Video c.640 – c. 630 BC First true coins produced in Lydia ~ Stater
Money throughout the history of the world Shells Live stock Precious stones Skulls Pearls Wheat Feathers Brass Silver Gold Paper money
What is money? Money is anything that serves as a medium of exchange, a unit of account, and a store of value.
What is money? (cont’d) Money as a Medium of Exchange A medium of exchange is anything that is used to determine value during the exchange of goods and services. Money as a Unit of Account A unit of account is a means for comparing the values of goods and services. Money as a Store of Value A store of value is something that keeps its value if it is stored rather than used.
Money as a Medium of Exchange Anything that is used to determine value during the exchange of goods and services. What if money didn’t exist? Barter ~ exchange of one thing for another. Give you this for that.
Money as a Unit of Account A means for comparing the values of goods and services. Comparing the value of items sold in stores.
Store of Value Money keeps it value with one exception of inflation ~ general increase of prices. Example : P. 244
Sell VCR to purchase CD Player. $100.00
Don’t purchase CD Player right away ~ keep money. $100.00
U.S experiences 10 percent inflation. The money your received would have 10 % less value. $90.00 Value.
Question? P. 244 As a medium of exchange money determines value during the exchange of goods and services. As a unit of account, it provides a way to compare the value of goods and services. As a store of value, it general keeps its value if it is stored rather than spent. How does inflation affect the use of money as a store of value?
Characteristics of Money The coins and paper bills used as money in a society are called currency. A currency must meet the following characteristics: Durability Objects used as money must withstand physical wear and tear. Portability People need to be able to take money with them as they go about their business. Divisibility To be useful, money must be easily divided into smaller denominations, or units of value.
Characteristics of Money (cont’d) Uniformity Any two units of money must be uniform, that is, the same, in terms of what they will buy. Limited Supply—SCARCITY! Money must be available only in limited quantities. Acceptability Everyone must be able to exchange the money for goods and services.
Question? Page 245 Coins used throughout the Roman Empire provide a good example of the six characteristics of money. What does the fact that Roman coins have been found in places as far from Rome as Britain and Egypt suggest about how well the coins served as currency?
Sources of Money’s Value Commodity Money Commodity money consists of objects that have value in themselves. Representative Money Representative money has value because the holder can exchange it for something else of value. Fiat Money Fiat money, also called “legal tender,” has value because the government decreed that is an acceptable means to pay debts.
The Three Uses Of Money Review Money is anything that serves as a Medium of exchange Unit of account Store of value
3 Functions of Money Medium of exchange, Money determines the value during the exchange of goods and services. Unit of Account, provides a way to compare the value of goods and services. Store of Value , It generally keeps it’s value if it is stored rather than spent.
Money Quiz : http://www.wdfi.org/ymm/kids/history/quiz.asp Practical Money Skills Game http://www.practicalmoneyskills.com/games/quiz/index.html Facts about Money: http://www.factmonster.com/ipka/A0774850.html