MONEY

What is money? Anything that people will accept as payment for goods & services

Types of Money Commodity Money Derives its value from the type of material from which it is composed Best example in history are coins made from precious metals Problem w/commodity money  people hoard it if it becomes too valuable

Representative Money Paper money backed by something hard (gold/silver)

Fiat Money Nothing hard backing it, but declared by the gov’t & accepted by citizens to have worth Started in 1971 Gov’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.

Functions of Money Medium of exchange Measure of value Store of value

Physical Characteristics of Money Portable Money needs to be small, light & easy to carry Paper $ is easy to carry

Divisibility If broken down, it can’t lose its value Change can be made

Durability Sturdy enough to last throughout many transactions

Uniformity Having features and markings that make it recognizable

Economic Characteristics of Money Stability of value You must control inflation

Scarcity Money must be scarce to have any value

Acceptability Everyone must agree to its value What two types of money did American citizens reject? 1. Susan B. Anthony dollar 2. 2 – dollar bill

What makes up the money supply in the United States? Currency – coins and paper Checking account/demand deposits Near money – including savings accounts

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.

Checks are safer than cash You have a record of the transaction If you lose a check, you can stop payment If you lose a credit card, you can cancel the card If you lose cash, YOU LOSE!

Cashless Society?? Over the last 10 years, society has relied more on credit & debit cards Credit debt has gone up