Economics
Money and Banking
Mr. Holbrook
Functions and Characteristics of Money
Quick About Me—
Mr. Holbrook
• Senior at Boston College
• Majoring in History and Secondary Education
• Doing my full-time student teaching with Mr.
Comeau (I was at Dedham in the fall of 2013)
• From Medfield, MA—attended Medfield High
• Bonus: Boston sports (mainly the Sox), good TV and
movies, Springsteen, studying abroad in Italy
Roadmap Ahead
• Things we will cover:
What is money, and how do we use it?
The history of the banking system in the United States
What the Federal Reserve is, and why it is important?
Current events in the business world and how it
connects to our material (and vice versa)
• Inside the world of Boston banking from a Boston
banking executive
•
•
•
•
Our Schedule
• Tuesday, March 3 - First class, introduction to money
• Homework Assignment: Find an article that relates to money and/or banking
from a newspaper or online website (Boston Globe, CNN.com, Fox Business)
and write a one paragraph summary. Be sure to include the link in your article.
• Wednesday, March 4 - The history of the banking system in the United
States
• Thursday, March 5 - The Federal Reserve
• Monday, March 9 - The Federal Reserve continued
• Tuesday, March 10 - Inside the world of Boston banking
• Thursday, March 12 - TBA
• Friday, March 13 - Quiz on Money and Banking, Current Events
Functions v. Characteristics
of Money
Functions of Money
Medium of
Exchange
Store of Value
Unit of Account
Characteristics of Money
•
•
•
•
•
•
Divisible
Portable
Acceptable
Scarce
Durable
Stable
Functions of Money
• What are the functions of money?
• Medium of exchange
• Store of value
• Unit of account
• Money is anything widely accepted as
final payment for goods and services.
Questions
• What gives money value?
• People are willing to accept it as final payment for
goods and services
• Is U.S. currency backed by either gold or
silver?
• No
• Since U.S. currency isn’t backed by gold or
silver, what is it backed by?
• People’s trust that it is worth something
Questions continued
• Who’s largely responsible for ensuring
that people continue to trust that our
currency is valuable?
• The Federal Reserve
Functions of Money
• Money acts as a go-between to make it
easier to buy things. Sellers agree to accept it
in exchange for a good or service. In this
way, money functions as a medium of
exchange.
• Money encourages specialization by
decreasing the costs (in both time and effort)
of trade.
Functions of Money
• When people hold money in their wallet, they are using
money to maintain value until they want to exchange that
value for a good or service. As a store of value, money
makes it easier for people to save and defer consumption
until the future.
• Money serves as a way to measure and compare the value
of goods and services in relation to one another. When
comparing prices, individuals can determine if one good
is a better buy than another. Money also allows people to
keep accurate financial records. As a unit of account,
money is used to compare the market value of different
goods and services.
Characteristics of Money
•
Divisible — Money must be easily divided into small parts so that
people can purchase goods and services at any price.
•
Portable — Money must be easy to carry.
•
Acceptable — Money must be widely accepted as a medium of
exchange.
•
Scarce — Money must be relatively scarce and hard for people to
obtain.
•
Durable — Money must be able to withstand the wear and tear of
many people using it.
•
Stable — Money’s value must remain relatively constant over long
periods of time.