Banking and MONEY Money and How We Use It Evolution of Money Properties of Money Alternatives to Coin and Currency

Money Principles of Banking pg. 54-60 Money is: An accepted means of making and receiving payments A means to complete transactions between parties within the economy Is a measure of a nation’s economic health The raw material of banking

Money: Other definitions I like: Money-an asset that is generally accepted as payment for goods and services or repayment of debt Wealth- value of assets minus liabilities Income-flow of earnings over time

The Evolution of Money “the official means of exchange” What is the system of bartering? Do you ever barter at lunch with your food? Could a person’s character be a consideration in a bartering agreement? What is a flaw of this system? What is an object with intrinsic value?

Evolution: Coin and Currency How could a government lower the intrinsic value or debase a coin? What is a commodity? Look this up from a reference other than the textbook. Nickels were made of Ni (Nickel) and dimes had a high silver content and pennies were a copper-alloy. The metal alloys have been changed since. Has this debased this currency? Why does a government change the value of the metal coin itself?

Evolution: Representative Money Carrying around bags of coins is cumbersome. Describe the first system to replace the use of coins with a more convenient means of exchange. What is a depository? What is bullion? Use an additional resource.

Evolution: Fraud Make a guess as to why the dime and quarter in US currency is milled and the nickel and penny is not. Were the first bills 2 sided? Forgery, fraud, counterfeiting…know what it is; not how to do it.

Evolution: Fiat Money What does “fiat” mean? All money today is ___ money, meaning that we do not exchange our currency for a gold brick. 1971- US went from the ___ Standard and the Bimetallic Standard to a managed float system. Fiat money comes from the government’s decree.

Sacagawea Golden Dollar Read pg. 56 “The Dollar Coin” Click on the hyperlink and listen to the 6 minute podcast. $1 Billion Dollars That Nobody Wants

$1 Billion Dollar-Podcast State your opinion: Is this a money saving operation?

Functions and Properties of Money Money has 3 basic functions: Medium of exchange Unit of Account Store of Value Explain each function!

Functions: Medium of Exchange To work as a medium of exchange an item must be: Easily portable; meaning? Readily divisible without losing its ___. Stable Scarce (explain the idea of scarcity)

Functions: Unit of account Unit of Account is a standard of measurement for the relative worth or ___ of goods and services. Money is the unit of account that we use to quote prices and record debts. It is a “standard” of value. Using dollars to make comparisons in value is easy. Example: You can buy a steak dinner for one diner at $26 or go to McDonalds and feed 4 people for the same price. (This is not a recommendation)

Money: Store of Value Money, stocks, bonds, houses, collectibles can all over store of value if they keep their value from day to day. We hold money because it is liquid. Liquidity is a measure of the ease with which an asset can turned into a means of payment. Market liquidity-ability to sell assets for money. Funding liquidity-ability to borrow money to buy securities or make loans.

Functions: Store of Value Legal Tender What does it mean…”this money is burning a whole in my pocket?” What is Legal Tender? Click hyperlink and you will find out! Holding money in a ___ account can build purchasing power. Money will keep its ___ in a sound economy. (do we have one of those?)

Why I NEVER have money: Because I am a teacher (wrong answer). I use other methods of payment. Name and describe alternatives to coin and currency: a. Check b. Credit cards Complete the list!

Questions Why was the gold/bimetallic standard abandoned? What is a more secure system than today? Explain. Why was the metal content of coins changed during WW II? Legal tender is another term for ___. What is the relationship between salt and the word “salary”? Why did tobacco as an exchange medium go up in smoke? (sorry, couldn’t help myself) What is float when you write a check? Is a check protected against counterfeiting? Does a debit card have float? See any disadvantages? Ever had a gift card…same as a stored ___ card. What is an advantage of online payments for bills? Are online accounts vulnerable to hackers? What can you do about this?

Did you know? 1. A $1 dollar bill has an average lifetime of 21 (days, months, quarters, years) in circulation before its condition degrades. 2. There is $___ in a Monopoly game. ($725, $8640, $15,140, $100,000) 3. It costs US Treasury’s Bureau of Engraving and Printing ___ to print a note whether it is a $1, $5, or $50. (0.5¢, 1¢, 7¢, 50¢