1. Agenda Bellringer Review Questions Textbook reading: Money
Notes: Money
HW: Quiz Friday

2. Review What is scarcity?
Limited resources for unlimited wants
What does a production possibility curve show us?
Opportunity costs
What is a traditional economy?
Based on tradition, Bartering
What is a market economy?
Capitalism, based on consumer wants and needs
What is a command economy?
Communism, based on government determined needs
What is a mixed economy?
Mixture of traditional, command, and market economies

3. Why do we have money?
As commerce and trade continued to evolve the process of bartering became much too complicated
Consider: If you wanted to sell your iPod and there was no money. You would have to find the person with the right goods (and quantity of them) that satisfied you enough to make the trade. With money, anyone can buy it if they have the cash.
Would you trade ipod for a floor waxing machine?
30 various fiction books?
Four pizzas?

4. What is money?
Can the following items be useful as currency?

5. Textbook reading Read and outline in your notes pages 557-561
Three functions of money
Six characteristics of money
Three types of money

6. Agenda
Bellringer
Quiz
Finish Money notes
Exit ticket

7. Quiz What does the term “Land” mean in economics?
What does a production possibility curve illustrate?
Define Scarcity
Provide an example of a trade off
Provide an example of physical capital in a landscaping business
Provide an example of human capital in a school
Define command economy
What form of economy did Adam Smith advocate?
Define traditional economy
What are the three big economic questions?

8. Money as Currency
Target: Money

9. Money
Is a Federal Reserve Note – meaning a piece of paper backed by the US governments promise it is worth something

11. Three Roles of Money

12. Medium of Exchange
Can be anything that is used to determine value during an exchange of goods and services
It is the same for everyone so bartering (unless used informally) is now extinct in our country
You can buy anything you want, spend a lot or a little, save, etc….
Everyone accepts cash

13. Unit of Account
Prices in the US are expressed in the same way in every store – in dollars and cents
Everyone knows the value of a dollar
People have ‘reasonable expectations’ of costs. You expect a movie will cost around $9, pizza $11, etc…
As a unit of account, money lets you compare prices and get the best deal (jacket in store A: $50, in store B: $35)
Every country has their own (Japan=Yen, Mexico=Peso)

14. Store of Value
You can save your money as long as you want and it will retain its value.
I can save the $5 in my pocket and spend it two years from now and it is still $5
Notable exception: Inflation (to be covered later). Simply put: prices rise over time.

15. Six Characteristics of Money
Durability
Made with cloth and paper to withstand wear and tear
Portability
Easily able to carry around
Divisibility
Able to be divided into smaller denominations on demand
Uniformity
They all look the same, count the same, buy the same
Limited Supply
Federal Reserve controls amount in circulation
Acceptability
Everyone in economy is able to use and accept money

16. Sources of Value
Commodity money: “stuff” that has value (ie: cattle, gems). Used only in simple, barter based economies
Representative money: Objects that only have value because they can be traded for goods with value (silver or gold certificates). Like an IOU but for something very specific.
Fiat Money: Money is valuable because our government says it is and only available in limited quantities therefore it is valuable. “Legal tender for all debts, public and private”

17. Circular Flow of Money (Market Economy)

18. Exit Ticket What are the three roles of money?
Identify the six characteristics of a good currency
What kind of money does the US utilize?