[Lesson 8] Money and its functions

Definition
Function
Classification

any object accepted
as means of
exchange within a
society

Function of Money
a medium
a measure

Function of Money
a medium
a measure
a standard

Function of Money
a medium
a measure
a standard
a store

“Money is the matter of functions four
A Medium, a Mesure, a Standard, a
Store.”
- William S. Jevon

Medium of Exchange
People use money
to exchange
goods

Medium of Exchange
Money makes transaction easier

Medium of Exchange
Money removes the need for
double coincidence of wants

Measure of Value
Money measures values of
goods and service in its
unit of account.

Measure of Value
“A unit of account is a
standard numerical
unit of measurement of
the market value of
goods, services, and
other transactions.”

The value from
consuming goods can
be stored in several
different ways, one of
the best is money.

If you don’t want to
spend your money
now, you can do it later.

HOWEVER
Inflation weakens the
ability of storing value
of money.

Standard of Deferred Payment
Future payments for current
purchases
Buying now, paying later

Standard of Deferred Payment
Inflation adjustment: interest rates

Classification of Money
Commodity money

Classification of Money
Commodity money
Token money

Commodity Money
Its value comes from
what made of it

Commodity Money
It is objects that
have value in
themselves as well
as value in their use
as money

Commodity Money
Gold
Silver
Copper
Shells
Cattles
Candy 

Token Money
Another name:
representative money

Token Money
It doesn’t have
real value in itself

Token Money
Its value comes from either
the commodity it stands for
or from a government
regulation or law.

Token Money
Paper money
Coins
Banknotes
Credit cards

[Lesson 8] Money and its functions

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