Economics Notes

CHAPTER 13 NOTES

Dollar Bill = Federal Reserve Note

Barter: No money is exchanged, but instead exchanges services or items. Used throughout the world

FUNCTIONS OF MONEY

1.     Medium of Exchange

·       Sellers accept an item as payment for goods and services

2.     Standard of Value

·       Money provides people with a way of measuring the relative value of goods and services

·       Everything in measured in dollars and cents.

3.     Store of Value

·       Money can be saved or stored for later use.

o    Must be nonperishable

o    Does not deteriorate

o    Must maintain value overtime

o    So people can accumulate wealth for later use.

5 MAJOR CHARACTERISTICS OF MONEY

1.     Durability

·       Money must last

·       Can be used over and over again

2.     Portability

·       You must be able to carry it from place to place

·       Size matters: You must be able to carry it

3.     Divisibility

·       Ability to be divided into smaller amounts

·       We have to be able to make change

4.     Stability in Value

·       Must maintain its value

·       Remains stable in price

5.     Acceptability

·       All people are willing to accept it in exchange for service and goods

SOURCES OF MONEY VALUES

1.     Commodity Money

Money that is also valuable by itself

Example: Gold, Silver

2.     Fiat Money

Worth something only because the government says its worth something

It has no value by itself

            Example: United States Money

PAPER MONEY MADE

Washington DC

COINS MADE

D: Made in Denver

P: Pilladelphia

DEMAND DEPOSIT

            Money you can get to on demand

            Your Checking Account, ATM Card

NEAR MONEY

Money you have, but is a hassle to get to

            Time Deposits