What is Money?

Durability

must withstand physical wear and tear that is a part of being used over and over again

What are the advantages of money?

- Money acts as a medium of exchange, making trade easier - Money encourages specialization by decreasing the costs for exchange - Money acts as a store of value, making it easier to save and invest - Money acts as a measure of value, making it easier to compare the value of goods and services

What are the six characteristics of money?

1) Durability 2) Portability 3) Divisibility 4) Uniformity 5) Limited Supply 6) Acceptability

How does money make it easier to compare the value of goods and services?

Money acts as a measure of value

How does money make trade easier?

Money acts as a medium of exchange

How does money make it easier to save and invest?

Money acts as a store of value

What does decreasing the costs of exchange encourage?

Specialization

Money

anything widely accepted as final payment for goods and services

Acceptability

everyone must be able to use the object meant to be used as money as a medium of exchange

Fiat Money

has value because the government has declared that it is acceptable for paying debt (ex. cash)

Commodity Money

has value in itself (ex. gold coin)

Basic Money Supply (in the US)

is made up of currency, coins, and checking account deposits

Divisibility

money must be easily divided into smaller denominations

Uniformity

money must be uniformed, easy to count and measure

Portability

people need to be able to take money with them from place to place

Limited Supply

the money supply must be kept in limited supply

What does money make it easier to do?

to trade, borrow, save, invest, and compare the value of goods and services