The Functions and Characteristics of Money Chapter 14 Section 1 The Functions and Characteristics of Money

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Money Anything used as a medium of exchange, a unit of accounting, and a store of value.

Functions of Money #1 - MEDIUM OF EXCHANGE Sellers willing to accept it in exchange for a good or service. Barter – Exchange of goods or services for a different good or service.

Cont. #2 - UNIT OF ACCOUNTING Use of money allows us to compare the value of goods and services to other businesses and countries. Allows us to compare products (find bargains)

Cont. #3 - STORE OF VALUE Use of money to store purchasing power for later use. Can SAVE $ (problems with inflation can occur)

Characteristics of Money

Types of Money Commodity Money – Goods that have value (Ex. Cattle, Gems, Metals) aside from money. Representative Money – Backed by an item of value – IE Silver or Gold. US Before Fiat Money – Government Order. Legal Tender. United States uses this.