Money

1
Money

• In this lesson, students will be able to
  identify characteristics of money.
• Students will be able to identify and/or define
  the following terms
• Money
• Commodity Money
• Representative Money
• Fiat Money

2
We use it every day but what is money?
3
Money

• Money is a medium of exchange, a unit of account,
  and a store of value.
• As a medium of exchange, money measures value
  during the exchange of goods and services.
• What is the value of a sweater?

4
When we purchase a sweater, we use money as a
medium of exchange.
5
Money, Again

• As a unit of account, money is a way to compare
  the value of goods and services.
• A more expensive sweater is considered more
  valuable than a cheaper sweater.
• Finally, money is a store of value. Money holds
  its value even if it is not used though inflation
  affects money.

6
An expensive price tag tells us something about
the goods value.
7
And if we dont spend it today, thats O.K., too.
Money is a store of value. It keeps its value
unless inflation occurs.
8
But I dont have to tell you about inflation.
You know all about rising prices. Youve been to
the gas station.
9
Not All Money is the Same

• Commodity money can be used as money but also has
  value in itself.
• An example of commodity money is salt. Salt was
  once used in some societies as money.
• Salt could be used as money or eaten.

10
Long ago, in some societies, salt was used as
money. Salt is an example of commodity money.
Salt can be used as money or eaten.
11
Representative Money

• Representative money is another type of money.
• An example of representative money is an I.O.U.
• The paper that the I.O.U. is written on can be
  exchanged for something valuable.

12
Our dollars were once backed by gold. You could
exchange a dollar for gold.
13
Fiat Money

• Fiat money is our money today.
• Our money is money because the government states
  that it is an acceptable means to pay debts.
• In other words, its money because the government
  says so.

14
Its money because the government says so.
Its fiat money.
15
Six Characteristics of Money

• Do we use pigs as money or paper as money? How
  does a society decide?
• There are six characteristics of good money.
  Money should be portable, divisible, durable,
  uniform, accepted, and have a limited supply.
• Too much money in circulation means less value.

16
Questions for Reflection

• What is money?
• Explain each of the three functions of money.
• Provide an example of commodity money.
• What is representative money?
• How does fiat money differ from commodity money
  and representative money?