1. MONEY Macroeconomic Unit

2. History of Modern Money Before money was developed people would barter (trade) for goods Trade Problems Double coincidence of wants Two people having what the other wants Time consuming Making change

3. History of Modern Money People began to use different items as a medium of exchange such as gold, stones, shells, cocoa beans Money is anything a person will take in trade for a good or service

4. History of Modern Money Gold became the most common type of currency, but gold had problems: heavy, attracted thieves People began to leave their gold in the town’s goldsmith’s safes and trading receipts -- led to modern banking

5. Modern Banking Origins People used the gold receipts to make purchases Many people and shops did not redeem the gold, but continued to use the paper receipts to trade – 1 st paper currency

6. Modern Banking Origins Goldsmiths became the first bankers Receipts became the origin of paper currency Loans of gold from the goldsmiths became the first use of fractional reserve banking

7. Why Use Money Convenient Remains good Divisible Standard Values

8. What Gives Money Value Belief General Acceptability – every store takes it Legal tender – gov’t says its valuable to pay debt Debt backed by the federal gov’t

9. Types of Money Intrinsic Value – made of material that is valuable Commodity Money Ex.: gold coins, diamonds, cattle Face Value – value b/c it states it on the outside Representative Money Paper backed by gold, silver, etc. Fiat Money Money b/c gov’t says so; backed by belief and confidence in the gov’t

10. Money Facts IS: Federal Reserve Notes = Currency Demand Deposits = Checking Accts. Debit and Check Cards IS NOT : Credit Cards = loan Savings Acct = Near Moneys

11. Money Functions of Money: Medium of ExchangeUnit of AccountStore of Value