Describe the three uses of money Identify and explain the six characteristics of money Understand the sources of moneys value Do Now What do you think is the difference between currency and money ID: 754313
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Slide1
Money!
E. 49Slide2
Objectives
Students will…
Describe the three uses of money
Identify and explain the six characteristics of money
Understand the sources of money’s valueSlide3
Do Now
What do you think is the difference between currency and money?Slide4
What is money?
Think about your favorite possession.
What do you think the value of that possession is? How is it determined?
What does money mean to you?Slide5
MONEY IS…
Anything that serves as a medium of exchange, a unit of account, and a store of value.
Three Uses of MoneySlide6
Medium of Exchange
Anything used to determine value during the exchange of goods and services
Without money, people would
barter – exchange goods and services for other g/s
Africa, Asia, Latin America Slide7
Critical Thinking
Suppose you live in a society where bartering is used.
What difficulties might you encounter in paying for certain services (i.e. medical care, education)?Slide8
Unit of Account
Means for comparing the values of goods and services
North Face jacket vs
Walmart Brand
$10 for movie, $1for Redbox,
$8-12/month for NetflixSlide9
Critical Thinking
Suppose you are shopping for a new backpack and want to get the best value for your money.
Explain how the fact that money functions as a unity of account can help you make your choice. Slide10
Store of Value
Money keeps its value if it is stored rather than used
$1 will always equal $1 – what it will buy can change with inflation (purchasing power)
Saving to buy a new phone vs. buying a candy bar today and a year from todaySlide11
Six Characteristics of Money
What do you think it takes for money to actually be money?
Not the manufacturing process…Slide12
Historical Characteristics of Money
Currency – coins and paper bills used as money
Cattle, salt, dried fish, furs, precious stones, gold, silver
Porpoise teeth, rice, wheat, shells, tulip bulbs, olive oil Slide13
1. Durability
Objects used as money have to
wthstand
the physical wear and tear that comes with being used constantly over time
If money wears out or is easily destroyed, it cannot be trusted as a store of value
Our bills are made from cloth; helps keep content in circulation longer
If they wear out, the gov’t can easily replace themSlide14
2. Portability
Need to be able to take your money with you; must be easy to transfer during exchangesSlide15
3. Divisibility
Must be easily divided into smaller denominations
Only have to use as much of it as necessary for any exchangeSlide16
4. Uniformity
Any two units of money must be uniform in what they will buy
Must be able to count and measure money accuratelySlide17
5. Limited Supply/Scarcity
Example: pebbles as money
Pebbles have only been found on one beach. One day, someone finds an enormous supply of pebbles on a different beach. Now anyone can scoop up pebbles by the handful. Pebbles no longer scarce, no longer useful as currency.
Federal Reserve – controls money supply to keep just the right amount of money available. Slide18
6. Acceptability
Everyone in an economy must be able to exchange the objects that serve as money for goods and services. Slide19
Check on Learning
List the 6 characteristics of money…. IN ALPHABETICAL ORDER!
Slide20
Sources of Money’s Value
Coins and bill have very little value in and of themselves
So… what gives money value?
Depends….Slide21
Commodity Money
Consists of objects that have value in and of themselves and that are also used as money.
Crops, livestockSlide22
Representative Money
Makes use of objects that have value because the holder can exchange them for something else of value.
IOUs
Gold and silver certificates, banknotes (promise to convert into coin on demand)Slide23
Fiat Money
“Legal tender”; has value because the gov’t has decreed that it is an acceptable means to pay debts. Slide24
https://
www.youtube.com/watch?v=DyV0OfU3-FU&t=7s
Start at 3:10
20ish minutesSlide25
THE US DOLLAR HAS FAILED… IT’S UP TO YOU TO CREATE NEW CURRENCY
Currency Project (35 points)
You and your group will create your own currency for your own country.
Your currency must meet the 6 characteristics (2 points each)
2 large denominations (2 points each)
4 small denominations (1 point each)
You will also be graded on creativity (10 points) and neatness (5 points)