Anything that serves as a medium of exchange, a unit of account, and a store of value What is Money?Money

STAGES IN THE EVOLUTION OF MONEY 1.COMMODITY MONEY Barter (Anything of Value) 2.METALIC MONEY Coins 3.PAPER MONEY 4.CREDIT MONEY Checks, Drafts, P.O., I.O.U. 5.ELECTRONIC MONEY credit cards, e-money, electronic cash, electronic currency, digital money, digital cash or digital currency

The Three Uses of Money Money as a Medium of Exchange –Anything that is used to determine value during the exchange of goods and services –Alternative: barter; direct exchange of one set of goods or services for another

The Three Uses of Money Money as a Unit of Account –Provides a means for comparing the values of goods and services $30.00 $40.00

The Three Uses of Money Money as a Store of Value –This means money keeps its value if you decide to hold on to – or store- it instead of spending it

The Six Characteristics of Money Durability –Money must withstand the physical wear and tear that comes with use –If it can be easily destroyed it cannot be trusted

The Six Characteristics of Money Portability –Must be easy to carry, very portable, and small and light

The Six Characteristics of Money Divisibility –Must be able to be divided into smaller denominations

The Six Characteristics of Money Uniformity –Any two units of money must be uniform: the same in terms of what they will buy

The Six Characteristics of Money Limited Supply –The ability to manage your money to keep just the right amount of money available

The Six Characteristics of Money Acceptability –Everyone in an economy must be able to exchange the objects that serve as money for goods and services

Source of Money’s Value Commodity Market –Consists of objects that have a value in themselves and that are also used Precious stones, salt

Source of Money’s Value Representative Money –Makes use of objects that have value because the holder can exchange them for something else of value An IOU, Silver Certificate

Source of Money’s Value Fiat Money –“Legal tender” that has value because the government has decreed that is an acceptable means to pay debts. –Valuable due to its limited availability