Warm-Up What would the world be like if no one used money at all? What would we have to do instead?

In the beginning… Barter (Trade) System

Over time… Switched to commodity money—something that has value in itself E.g. gold coins

The ultimate money… Fiat money—has no real value itself, but has value because the government has declared that it is acceptable for paying debts. E.g. U.S. dollar

Why money is important Money acts as a medium of exchange, making trade easier.

Why money is important Money acts as a store of value Money holds value—it doesn’t go bad

Why money is important Money acts as a measure of value Allows you to compare values of goods and services (the more it costs, the more value)

Three Characteristics of all Money 1. Durability—can’t be destroyed easily

Three Characteristics of all Money 2. Portability—can transport easily

Three Characteristics of all Money 3. Divisibility—can divide into parts

Why is barter (trade) not as good as just using money? When you trade, both people have to want what the other has When you just use money, you can use the money for many things, so you’re more likely to trade

So who prints/mints the U.S. money? Department of the Treasury Bureau of Engraving and the U.S. Mint

So who collects your taxes? Internal Revenue Service (IRS)