Post on 14-Dec-2015
transcript
• Anything that serves as a medium of exchange, a unit of account, and a store of value
What is Money?
STAGES IN THE EVOLUTION OF MONEY
1. COMMODITY MONEYBarter (Anything of Value)
2. METALIC MONEYCoins
3. PAPER MONEY4. CREDIT MONEY
Checks, Drafts, P.O., I.O.U.5. ELECTRONIC MONEY
credit cards, e-money, electronic cash, electronic currency, digital money, digital cash or digital currency
The Three Uses of Money
• Money as a Medium of Exchange– Anything that is used
to determine value during the exchange of goods and services
– Alternative: barter; direct exchange of one set of goods or services for another
The Three Uses of Money
• Money as a Unit of Account– Provides a means for comparing the values of
goods and services
$30.00$40.00
The Three Uses of Money
• Money as a Store of Value– This means money keeps its value if you
decide to hold on to – or store- it instead of spending it
The Six Characteristics of Money
• Durability– Money must withstand the physical wear and
tear that comes with use– If it can be easily destroyed it cannot be
trusted
The Six Characteristics of Money
• Portability– Must be easy to carry, very portable, and
small and light
The Six Characteristics of Money
• Divisibility– Must be able to be divided into smaller
denominations
The Six Characteristics of Money
• Uniformity– Any two units of money must be uniform: the
same in terms of what they will buy
The Six Characteristics of Money
• Limited Supply– The ability to manage your money to keep just
the right amount of money available
The Six Characteristics of Money
• Acceptability– Everyone in an economy must be able to
exchange the objects that serve as money for goods and services
Source of Money’s Value
• Commodity Market– Consists of objects that have a value in
themselves and that are also used • Precious stones, salt
Source of Money’s Value
• Representative Money– Makes use of objects that have value
because the holder can exchange them for something else of value
• An IOU, Silver Certificate