Agenda
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Bellringer
Review Questions
Textbook reading: Money
Notes: Money
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HW: Quiz Friday
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Review
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What is scarcity?
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What does a production possibility curve show us?
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Capitalism, based on consumer wants and needs
What is a command economy?
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Based on tradition, Bartering
What is a market economy?
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Opportunity costs
What is a traditional economy?
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Limited resources for unlimited wants
Communism, based on government determined needs
What is a mixed economy?
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Mixture of traditional, command, and market economies
Why do we have money?
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As commerce and trade continued to evolve the process
of bartering became much too complicated
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Consider: If you wanted to sell your iPod and there was
no money.You would have to find the person with the
right goods (and quantity of them) that satisfied you
enough to make the trade. With money, anyone can buy it
if they have the cash.
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Would you trade ipod for a floor waxing machine?
30 various fiction books?
Four pizzas?
What is money?
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Can the following items be useful as currency?
Textbook reading
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Read and outline in your notes pages 557-561
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Three functions of money
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Six characteristics of money
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Three types of money
Agenda
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Bellringer
Quiz
Finish Money notes
Exit ticket
Quiz
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10.
What does the term “Land” mean in economics?
What does a production possibility curve illustrate?
Define Scarcity
Provide an example of a trade off
Provide an example of physical capital in a
landscaping business
Provide an example of human capital in a school
Define command economy
What form of economy did Adam Smith advocate?
Define traditional economy
What are the three big economic questions?
Money as Currency
Target: Money
Money
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Is a Federal Reserve Note – meaning a piece of paper
backed by the US governments promise it is worth
something
Three Roles of Money
Medium of Exchange
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Can be anything that is used to determine value during an
exchange of goods and services
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It is the same for everyone so bartering (unless used
informally) is now extinct in our country
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You can buy anything you want, spend a lot or a little,
save, etc….
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Everyone accepts cash
Unit of Account
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Prices in the US are expressed in the same way in every store
– in dollars and cents
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Everyone knows the value of a dollar
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People have ‘reasonable expectations’ of costs.You expect a
movie will cost around $9, pizza $11, etc…
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As a unit of account, money lets you compare prices and get
the best deal (jacket in store A: $50, in store B: $35)
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Every country has their own (Japan=Yen, Mexico=Peso)
Store of Value
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You can save your money as long as you want and it will
retain its value.
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I can save the $5 in my pocket and spend it two years
from now and it is still $5
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Notable exception: Inflation (to be covered later). Simply
put: prices rise over time.
Six Characteristics of Money
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Durability
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Portability
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They all look the same, count the same, buy the same
Limited Supply
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Able to be divided into smaller denominations on demand
Uniformity
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Easily able to carry around
Divisibility
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Made with cloth and paper to withstand wear and tear
Federal Reserve controls amount in circulation
Acceptability
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Everyone in economy is able to use and accept money
Sources of Value
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Commodity money: “stuff” that has value (ie: cattle, gems).
Used only in simple, barter based economies
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Representative money: Objects that only have value
because they can be traded for goods with value (silver
or gold certificates). Like an IOU but for something very
specific.
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Fiat Money: Money is valuable because our government
says it is and only available in limited quantities therefore
it is valuable. “Legal tender for all debts, public and
private”
Circular Flow of Money (Market Economy)
Exit Ticket
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What are the three roles of money?
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Identify the six characteristics of a good currency
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What kind of money does the US utilize?