MONEY

Anything that people will accept as payment for goods & services

What is money?

Commodity MoneyDerives its value from the type

of material from which it is composedBest example in history are

coins made from precious metals

Problem w/commodity money people hoard it if it becomes too valuable

Types of Money

Paper money backed by something hard (gold/silver)

Representative Money

Nothing hard backing it, but declared by the gov’t & accepted by citizens to have worth

Started in 1971Gov’t must control its supply or

maintain its scarcity for the dollar to be worth more

Why is U.S. money considered “fiat money?”It’s only money because our gov’t

says it is.

Fiat Money

Medium of exchangeMeasure of valueStore of value

Functions of Money

PortableMoney needs to be small, light & easy to carry

Paper $ is easy to carry

Physical Characteristics of Money

If broken down, it can’t lose its value

Change can be made

Divisibility

Sturdy enough to last throughout many transactions

Durability

Having features and markings that make it recognizable

Uniformity

Stability of valueYou must control inflation

Economic Characteristics of Money

Money must be scarce to have any value

Scarcity

Everyone must agree to its value

What two types of money did American citizens reject?1. Susan B. Anthony dollar2. 2 – dollar bill

Acceptability

Currency – coins and paperChecking account/demand deposits

Near money – including savings accounts

What makes up the money supply in the United States?

You cannot be forced to accept a personal check for payment of a debt.

Over 80% of all spending is done through checks.

Even if you use credit cards, you usually pay them off with a check.

Checks are not legal tender!

You have a record of the transactionIf you lose a check, you can stop

paymentIf you lose a credit card, you can cancel the card

If you lose cash, YOU LOSE!

Checks are safer than cash

Over the last 10 years, society has relied more on credit & debit cards

Credit debt has gone up

Cashless Society??