FrontPage: Consider what money is used for. Could anything else be
used in its place?
The Last Word: Quiz next week
https://www.youtube.com/watch?v=F1_OoICS2
b8
Chapter 10, Section 1
Money is anything that people will accept in
exchange for goods and services.
Money should perform 3 important functions.
Function 1: Medium of Exchange
Money must serve as a medium of exchange, the means
through which goods and services can be exchanged.
Without money, economic transactions could only happen
through barter –
exchanging goods and services for other goods and
services have to give them.
Barter is inefficient because it requires a double
coincidence of wants – someone has what you want
and they want what you have to trade.
Function 2: Standard
of Value
Money allows people to
measure the relative
costs of goods and
services.
In the U.S., the basic
monetary unit is the
dollar which is used to
state the worth of goods
and services in our
economy.
Function 3: Store of Value
Money allows people to store the value of their
economic activities.
People generally do not have to spend money
immediately or only in one place.
FrontPage: NNIGN
- The more of them you take, the
more you leave behind. What are
they?
A Great Mother’s Day Gift?
- What belongs to you but others
use it more than you do?
- I am the beginning of sorrow, and
the end of sickness. You cannot
express happiness without me, yet
I am in the midst of losses. I am
always in risk, yet never in danger.
You will find me in sunshine, yet I
am also always in darkness.
The Last Word:
Ch 10 Quiz next week
To perform the 3 economic functions of money, an
item must possess certain physical and economic
properties.
- Physical
properties are
characteristics of
the item itself.
- Economic properties are linked to the role that
money plays in the market.
Durability – money should last throughout many
transactions, not spoil or fall apart.
Portability – money should be small, light, and easy to
carry.
Divisibility – money should be divisible so that change
can be made.
Uniformity – money should be uniform, having
features and markings that make it commonly
recognizable.
Stability of value –
money’s purchasing
power, or value, should
remain relatively stable.
Scarcity – money must be
scarce to have any value.
Acceptability – people
must be willing to accept
it in payment for goods
and services.
Commodity money derives its value from the
type of material from which it is composed.
Ex. gold, cattle, rice, etc.
Representative money has no intrinsic value, but
can be exchanged for something that does.
US dollars once were able to be exchanged for an
equivalent amount of gold or silver.
Fiat money is declared by the govt. and accepted
by citizens to have worth (ex. US $ today).
Currency is paper money
and coins.
Checking accounts (and
debit cards) are called
demand deposits
Funds can be converted into
currency “on demand.”
Can be used “on demand” to
purchase things.
“Money can't buy love, but it improves your
bargaining position.”
Near money is savings accounts and time
deposits that can be converted into cash
relatively easily.
It is measured in the same terms as money
(ex. $), but is NOT actually money itself.
“one step away” from being used as
money
“A wise person should have money in their
head, but not in their heart.” –Jonathan Swift
M1 is the narrowest definition of the
money supply and includes currency,
demand deposits, and other checkable
deposits. (2013 – 2.58 Trillion)
M2 is a broader measure that includes all
of M1 plus savings accounts, certificates of
deposits, and money market mutual funds.
(2013 – 10.98 Trillion)
All US currency remains legal tender, regardless
of when it was produced.
It costs about $3 on average to produce one
note of currency.
The law prohibits the changing of the design of
the $1 bill.
The most counterfeited bill INSIDE the US is the
$20 bill.
https://uscurrency.gov/security/100-securityfeatures-2013-present
How long will “currency” be in circulation?
Will we ever be a society without paper money
and coins?
What could be the problems? Are there
advantages?
What currency was the highest performing
currency in the world in 2015?
https://www.youtube.com/watch?annotation_id=annotation_1292109769&feature=iv&src_vid=Um63OQz3bjo&v=Gc2en3nHxA4