CURRENCY AND ITS IMPLICATIONS Money in the world…

Anything accepted as payment 4 types of money: Commodity money Flat Money Credit Money Representative Money Money in the World

Commodity Money  Value comes from the commodity which is was made  Can be used as a medium of exchange  Examples: gold, silver, copper, salt, peppercorns, large stone. A commodity is the same no matter who produces it Different types of commodities

Fiat Money  Government declares Fiat money to be legal tender  Because it is considered legal tender, it is made to be used when buying or selling good as well as paying taxes.  Examples: US dollar, Euro, Yuan, and Yen Has value only by government order Various paper currencies from around the world

Credit Money  Claim against a person to purchase goods  Something that is not immediately repayable, a promise of future payment  Examples: credit cards, banknotes, Consider as an IOUCommon example of credit money

Representative Money  Money that consists of a claim held elsewhere  Certain amount of valuable metal is stored in treasury while equivalent paper is in circulation  Examples: gold certificates, silver certificates Metal backed moneyGold Certificate

The different values money takes on in the world Values

Exchange Rates  The exchange rate between two currencies compares the currency of one country to the currency of an other in a ratio.  The Foreign Exchange Market trades currencies and makes it easier for a bank to buy and sell currencies.  Values of currencies change depending on the economy of the supplying country

For example The conversion rate between one USD and one Chinese Yuan is 1 to 6.826, respectively The conversion rate between a USD and a British Pound is 1 USD to.628 GBP Therefore, take into consideration 100 USD. How many Yuan would that be equal to? How many GBP would that be equal to? 100 USD = Yuan = 62.8 GBP

How stable IS the economy? Stability

Economic Stability  An economy is said to be stable when there is minimal inflation as well as constant output growth.  When a certain economy is unstable, it is said to have frequent large recessions and very high variable inflation.  Although the USA is currently in a recession, it is considered economically stable. Germany as well as Japan are also two very economically stable countries. Fluctuation in the macro economyEconomically stable countries

History behind money  First began using barter-like methods  Many cultures later developed commodity money  This system then evolved into using representative money  Paper money was then used after the notes of representative money were eventually made legal tender  Now, money can be used in many different ways including the purchasing of goods over the internet using credit cards History of moneyMoney growing!

COUNTERFEIT MONEY The illegal reproduction of money

Fraud  The illegal production or replication of currency is considered fraud.  Counterfeiting is as old as money itself.  Clipping  Modern counterfeiting includes the reproduction of paper money  Can be used as a means of warfare  Can cause the value of real money to decrease  Inflation due to the over circulation of money  Companies can lose money because they do not get reimbursed if counterfeits effect them Counterfeit moneyEffects on society