Economics Money and Banking Mr. Holbrook Functions and Characteristics of Money

Quick About Me— Mr. Holbrook Senior at Boston College Majoring in History and Secondary Education Doing my full-time student teaching with Mr. Comeau (I was at Dedham in the fall of 2013) From Medfield, MA—attended Medfield High Bonus: Boston sports (mainly the Sox), good TV and movies, Springsteen, studying abroad in Italy

Roadmap Ahead Things we will cover: What is money, and how do we use it? The history of the banking system in the United States What the Federal Reserve is, and why it is important? Current events in the business world and how it connects to our material (and vice versa) Inside the world of Boston banking from a Boston banking executive

Our Schedule Tuesday, March 3 - First class, introduction to money Homework Assignment: Find an article that relates to money and/or banking from a newspaper or online website (Boston Globe, CNN.com, Fox Business) and write a one paragraph summary. Be sure to include the link in your article. Wednesday, March 4 - The history of the banking system in the United States Thursday, March 5 - The Federal Reserve Monday, March 9 - The Federal Reserve continued Tuesday, March 10 - Inside the world of Boston banking Thursday, March 12 - TBA Friday, March 13 - Quiz on Money and Banking, Current Events

Functions v. Characteristics of Money Functions of MoneyCharacteristics of Money  Medium of Exchange  Store of Value  Unit of Account Divisible Portable Acceptable Scarce Durable Stable

Functions of Money What are the functions of money? Medium of exchange Store of value Unit of account Money is anything widely accepted as final payment for goods and services.

Questions What gives money value? People are willing to accept it as final payment for goods and services Is U.S. currency backed by either gold or silver? No Since U.S. currency isn’t backed by gold or silver, what is it backed by? People’s trust that it is worth something

Questions continued Who’s largely responsible for ensuring that people continue to trust that our currency is valuable? The Federal Reserve

Functions of Money Money acts as a go-between to make it easier to buy things. Sellers agree to accept it in exchange for a good or service. In this way, money functions as a medium of exchange. Money encourages specialization by decreasing the costs (in both time and effort) of trade.

Functions of Money When people hold money in their wallet, they are using money to maintain value until they want to exchange that value for a good or service. As a store of value, money makes it easier for people to save and defer consumption until the future. Money serves as a way to measure and compare the value of goods and services in relation to one another. When comparing prices, individuals can determine if one good is a better buy than another. Money also allows people to keep accurate financial records. As a unit of account, money is used to compare the market value of different goods and services.

Characteristics of Money Divisible — Money must be easily divided into small parts so that people can purchase goods and services at any price. Portable — Money must be easy to carry. Acceptable — Money must be widely accepted as a medium of exchange. Scarce — Money must be relatively scarce and hard for people to obtain. Durable — Money must be able to withstand the wear and tear of many people using it. Stable — Money’s value must remain relatively constant over long periods of time.