6.1

List the six characteristics of money

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

define what it means to say that money is an acceptable form of payment

A person that accepts money as a form of payment can use it for something else.

Gross Domestic Product (GDP)

All the goods and services produced in a country in one year.

money

a current medium of exchange in currency in the form of coins and banknotes

unit of account

a means for comparing the values of goods and services

store of value

an item that people can use to transfer purchasing power from the present to the future. Will buy less at times.

medium of exchange

anything that is used to determine value during the exchange of goods and services

Specie

money in the form of gold or silver coins

Flat money

money that has value because the government said it has value

commodity money

objects that have value in themselves and that are also used as money

explain how although in some societies cattle is used as a type of money, why cattle is actually not a good source of money

Cattle would not be good used as currency today because some cattle can be more unhealthy than another causing disputes. Also when paying in a store it would be a great inconvenience.

currency

Coins and paper bills used as money

what is one disadvantage of bartering over using currency

Disadvantages are that bartering frequently requires much time and hassle and that goods are often not readily divisible, meaning that swapped goods have to be basically equal in value if a trade is to occur. Money that has intrinsic value can be used for purposes other than for use as money.

barter

Exchange goods without involving money.

explain what it means to say that money serves as a store of value

It means that you can not only use it to trade but also store it for future use.

explain why objects used as money need to be in limited supply

Objects used as money need to be in limited supply in order to maintain its value. The central bank makes banks sound safe, provides money and services for the banks, and is responsible for promoting a healthy economy using monetary tools.

Representative money

Representative money is any medium of exchange, often printed on paper, that represents something of value, but has little or no value of its own.

describe who controls the supply of money in circulation in the us

The Federal reserves controls the supply of money by increasing or decreasing the monetary base. The monetary base is related to the size of the Fed's balance sheet; specifically, it is currency in circulation plus the deposit balances that depository institutions hold with the Federal Reserve.

if you write your friend and iou for a loan of twenty dollars what type of money have you given her?

You have given her representative money, which has no value.