Money
In this lesson, students will be able to identify
characteristics of money.
Students will be able to identify and/or define
the following terms:
Money
Commodity Money
Representative Money
Fiat Money
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We use it every day but what is money?
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Money
• Money is a medium of exchange, a unit of
account, and a store of value.
• As a medium of exchange, money
measures value during the exchange of
goods and services.
• What is the value of a sweater?
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When we purchase a sweater, we use
money as a medium of exchange.
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Money, Again
• As a unit of account, money is a way to
compare the value of goods and services.
• A more expensive sweater is considered
more valuable than a cheaper sweater.
• Finally, money is a store of value. Money
holds its value even if it is not used though
inflation affects money.
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An expensive price tag tells us something
about the good’s value.
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And if we don’t spend it today, that’s
O.K., too. Money is a store of value. It
keeps its value unless inflation occurs.
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But I don’t have
to tell you about
inflation. You
know all about
rising prices.
You’ve been
to the gas
station.
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Not All Money is the Same
• Commodity money can be used as money
but also has value in itself.
• An example of commodity money is salt.
Salt was once used in some societies as
money.
• Salt could be used as money or eaten.
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Long ago, in some
societies, salt was
used as money.
Salt is an example
of commodity
money. Salt can
be used as money
or eaten.
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Representative Money
• Representative money is another type of
money.
• An example of representative money is an
I.O.U.
• The paper that the I.O.U. is written on can
be exchanged for something valuable.
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Our dollars
were once
backed by
gold. You
could
exchange a
dollar for gold.
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Fiat Money
• Fiat money is our money today.
• Our money is money because the
government states that it is an acceptable
means to pay debts.
• In other words, its money because the
government says so.
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Its money
because
the government
says so. Its
fiat money.
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Six Characteristics of Money
• Do we use pigs as money or paper as money?
How does a society decide?
• There are six characteristics of good money.
Money should be portable, divisible, durable,
uniform, accepted, and have a limited supply.
• Too much money in circulation means less
value.
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Questions for Reflection:
• What is money?
• Explain each of the three functions of
money.
• Provide an example of commodity money.
• What is representative money?
• How does fiat money differ from
commodity money and representative
money?
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