2 What is money?Anything that people will accept as payment for goods & services
3 Types of Money Commodity Money Derives its value from the type of material from which it is composedBest example in history are coins made from precious metalsProblem w/commodity money people hoard it if it becomes too valuable
4 Representative MoneyPaper money backed by something hard (gold/silver)
5 Fiat MoneyNothing hard backing it, but declared by the gov’t & accepted by citizens to have worthStarted in 1971Gov’t must control its supply or maintain its scarcity for the dollar to be worth moreWhy is U.S. money considered “fiat money?”It’s only money because our gov’t says it is.
6 Functions of MoneyMedium of exchangeMeasure of valueStore of value
7 Physical Characteristics of Money PortableMoney needs to be small, light & easy to carryPaper $ is easy to carry
8 Divisibility If broken down, it can’t lose its value Change can be made
9 DurabilitySturdy enough to last throughout many transactions
10 UniformityHaving features and markings that make it recognizable
11 Economic Characteristics of Money Stability of valueYou must control inflation
13 Acceptability Everyone must agree to its value What two types of money did American citizens reject?1. Susan B. Anthony dollar2. 2 – dollar bill
14 What makes up the money supply in the United States? Currency – coins and paperChecking account/demand depositsNear money – including savings accounts
15 Checks are not legal tender! 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.
16 Checks are safer than cash You have a record of the transactionIf you lose a check, you can stop paymentIf you lose a credit card, you can cancel the cardIf you lose cash, YOU LOSE!
17 Cashless Society??Over the last 10 years, society has relied more on credit & debit cardsCredit debt has gone up