Money
Everyday Economics
Introduction Paragraph— Read the opening paragraph. In your own words, paraphrase the introduction
paragraph on page 1 in no more than 3 sentences.
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What is Money?
Define MONEY: ___________________________________________________________________________
Finish the sentence-- No matter the size of the economy, _______________________________________
________________________________________________________________________________________.
Define FACILITATES:_________________________________________________________________
A World Without Money
Define BARTERING:________________________________________________________________________
What 3 conditions must be met for bartering to occur?
1.________________________________________________________________________________
2.________________________________________________________________________________
3.________________________________________________________________________________
The Evolving US Currency, bottom pg.2
Continentals
were used
around the
time of the
American
Revolution
1770s).
*****Imagine having to barter at the grocery
store!!!
Defining Money by Its Uses
What are the 3 functions of money?
1.______________________________________________________________________________
2.______________________________________________________________________________
3.______________________________________________________________________________
Medium of Exchange.
What is a MEDIUM OF EXCHANGE?____________________________________________________________
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When we use money as a medium of exchange, what is removed from the transaction?_________________
Unit of Account.
Describe what unit of account means.__________________________________________________________
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What is the unit of account in the US?______________________ Mexico?_______________________
Once the prices are quoted using a _____________ unit of _____________, the ________________ become
_______________.
Store of Value.
What must money have to be a good “store of value”?_______________________________________________
What types of items are NOT good to maintain a store of value?(List actual items.)________________________
How much of a bill needs to be intact, in order for it to remain in circulation?_____________________________
Besides being durable, money must_______________________________________________________________.
The Characteristics of Money
About _______% of transactions in the US are made in cash.
List the 6 characteristics that money MUST meet:
The Evolving US Currency, pg.4
From 1836-62, about how many different
currencies were in circulation?
1. ______________________
__________________________________
2.______________________
Why were “paper coins” issued during
the Civil War?______________________
3.______________________
4.______________________
5.______________________
6.______________________
Durable
What is another name for “paper money” in the US?__________________________________________________
What materials are used to make our paper money?__________________________________________________
Portable
Describe why money needs to be “portable.”________________________________________________________
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What is the largest denomination in circulation today?_________________________________________________
Divisible
Describe money as “divisible.”____________________________________________________________________
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Scarce
What would happen if more money was created?_____________________________________________________
If we would like money to maintain its value, what must money be_______________________________________.
In the US, who is responsible for the money supply?___________________________________________________
Uniform
How are people able to determine the value of their money over time?____________________________________
All notes/bills are still redeemed ___________________________________________________________________
Acceptable
What is written on each Federal Reserve Note? “______________________________________________________
_____________________________________________________________________________________________”
What does that statement mean?__________________________________________________________________
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Types of Money
List the 3 types of money: 1)__________________________,2)_______________________ and 3)______________
Commodity Money
Define:________________________________________________________________________________
Examples:______________________________________________________________________________
What commodity has been the MOST common throughout
history?_________________________________________
Draw a picture of commodity money.
How is the commodity amount in circulation
determined?_______________________________________
Why is using a commodity as money difficult?
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Representative Money
Define:________________________________________________________________________________
When the government uses representative money, what are they promising?_______________________
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Define a SPECIE:_________________________________________________________________________
Fiat (pronounced like the Italian car) Money
Define:________________________________________________________________________________
“Fiat currency has no _________________ in and of _________________, as commodity money does, nor
does it ______________ a promise to ________________ for a commodity, as with __________________
currency.”
How is the value of fiat money determined?__________________________________________________
What are the advantages of fiat money?
1)____________________________________________________________________________
2)____________________________________________________________________________
3)____________________________________________________________________________
Describe some disadvantages of fiat money.__________________________________________________
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Explore the Concept…Inflation pg.8-9
Causes of Inflation and Deflation
-Supply of inputs changes
- Changes in consumer demand for a product
Describe the picture at the bottom of page 8.____________________________________________________
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Effects of Inflation
What is an acceptable rate of inflation in the US?___________
Describe what happens when someone has a fixed income or wages don’t increase same as
inflation?____________________________________________________________________________________
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Who else is hurt by inflation?__________________________________________________________________
How are they hurt?___________________________________________________________________________
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Measuring Inflation
What is the market basket?____________________________________________________________________
What is an INDEX?____________________________________________________________________________
What are the most common indexes used? 1)____________________________________________________
2)_____________________________________________________
3)_____________________________________________________
Regardless of the measurement used, what is the goal of using the indexes?___________________________
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The Federal Reserve and Inflation
Who has been charged with the job of maintaining stable prices in the US by Congress?_________________
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What tool do they use to help maintain stable prices?______________________________________________
What does the Federal Reserve do to interest rates to keep the economy in check?_____________________
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