# Unit 2: Microeconomics Supply and Demand 1. Money!!! Who is on the… 1.\$100 Bill 2.\$50 Bill 3.\$20 Bill 4.\$10 Bill 5.\$5 Bill 6.\$2 Bill 7.50 Cent 8.Dime.

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Unit 2: Microeconomics Supply and Demand 1

Money!!! Who is on the… 1.\$100 Bill 2.\$50 Bill 3.\$20 Bill 4.\$10 Bill 5.\$5 Bill 6.\$2 Bill 7.50 Cent 8.Dime 9.\$1000 Bill 10.\$100,000 Bill 1.Franklin 2.Grant 3.Jackson 4.Hamilton 5.Lincoln 6.Jefferson 7.JFK 8.FDR 9.Cleveland 10. Wilson Bonus: “E Pluribus Unum” means…. “Out of Many, One” 2

Why do we use money? What would happen if we didn’t have money? The Barter System: goods and services are traded directly. There is no money exchanged. Problems: 1.Before trade could occur, each trader had to have something the other wanted. 2.Some goods cannot be split. If 1 goat is worth five chickens, how do you exchange if you only want 1 chicken? 3 Example: A heart surgeon might accept only certain goods but not others because he doesn’t like broccoli. To get the surgery, a pineapple grower must find a broccoli farmer that likes pineapples.

Functions of Money Money is anything that people commonly accept in exchange for goods and services. Money was developed because of the difficulties in bartering.

Functions of Money In the USA money has 3 basic functions: 1. Medium of Exchange- Any item that a seller accepts as payment for goods and services. 2. Standard of value- Provides people with a way to measure the relative value of goods and services. 3. Store of value- Money can be stored or saved for a later date.

Characteristics of Money 1. Durability Refers to money’s ability to be used over and over. 2. Portability Money’s ability to be easily carried; and transferred from person to person. To be used as money, an item must have certain characteristics; the 5 major characteristics of money are:

Characteristics of Money 3. Divisibility Refers to money’s ability to be divided into smaller units. 4. Stability in Value Value of money must remain reliable. 5. Acceptability People are willing to accept money in exchange for goods and services.

SOURCES OF MONEY VALUE Economist have identified 3 sources of value for money, which is how it is identified: 1. Commodity Money- 1. Commodity Money- Money that has a value of its own. (Gold, Silver, Cigarettes) 2. Representative Money- 2. Representative Money- Money that has value because it can be exchanged for something of value. (Gold Standard) 3. Fiat Money- 3. Fiat Money- Money has value because the government has issued a fiat or decree saying so.(Paper money, coins)

FORMS OF MONEY The United States relies primarily on fiat Money. In America this type of money comes in 3 forms: 1. Coins and Paper Money 2. Demand Deposits- 2. Demand Deposits- (Checks) 3. Near Money- 3. Near Money- (Savings accounts, time deposits)

NOW ITS YOUR TURN The United States has been devastated by an alien attack. All that remains is a small remnant of citizens located in central Georgia, including Spalding County. During the destructive raid by the alien race, the American money system was destroyed. With no United States and no money, your group has been assigned the task of creating a new money for the survivors. Your new money cannot be paper money or coins. However, remember that your money must support the five functions of money discussed in class. Additionally, you must state what form of money you have created and what its source of value is. Finally, name your money and create a sign that includes the name and a visual representation of your money.

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