Presentation on theme: "E. Napp Money In this lesson, students will be able to identify characteristics of money. Students will be able to identify and/or define the following."— Presentation transcript:
E. Napp Money In this lesson, students will be able to identify characteristics of money. Students will be able to identify and/or define the following terms: Money Commodity Money Representative Money Fiat Money
E. Napp We use it every day but what is money?
E. Napp Money Money is a medium of exchange, a unit of account, and a store of value. As a medium of exchange, money measures value during the exchange of goods and services. What is the value of a sweater?
E. Napp When we purchase a sweater, we use money as a medium of exchange.
E. Napp Money, Again As a unit of account, money is a way to compare the value of goods and services. A more expensive sweater is considered more valuable than a cheaper sweater. Finally, money is a store of value. Money holds its value even if it is not used though inflation affects money.
E. Napp An expensive price tag tells us something about the goods value.
E. Napp And if we dont spend it today, thats O.K., too. Money is a store of value. It keeps its value unless inflation occurs.
E. Napp But I dont have to tell you about inflation. You know all about rising prices. Youve been to the gas station.
E. Napp Not All Money is the Same Commodity money can be used as money but also has value in itself. An example of commodity money is salt. Salt was once used in some societies as money. Salt could be used as money or eaten.
E. Napp Long ago, in some societies, salt was used as money. Salt is an example of commodity money. Salt can be used as money or eaten.
E. Napp Representative Money Representative money is another type of money. An example of representative money is an I.O.U. The paper that the I.O.U. is written on can be exchanged for something valuable.
E. Napp Our dollars were once backed by gold. You could exchange a dollar for gold.
E. Napp Fiat Money Fiat money is our money today. Our money is money because the government states that it is an acceptable means to pay debts. In other words, its money because the government says so.
E. Napp Its money because the government says so. Its fiat money.
E. Napp Six Characteristics of Money Do we use pigs as money or paper as money? How does a society decide? There are six characteristics of good money. Money should be portable, divisible, durable, uniform, accepted, and have a limited supply. Too much money in circulation means less value.
E. Napp Questions for Reflection: What is money? Explain each of the three functions of money. Provide an example of commodity money. What is representative money? How does fiat money differ from commodity money and representative money?