Money and Banking

Do you know??? Who was responsible for the decision that the US would have a monetary system based on decimals, and a dollar being 100 cents? Benjamin Franklin and Alexander Hamilton Congress adopted this proposal in 1786. In 1792, the first official American silver coin, the half dime was minted. Sooooooooooooo……. What is money? How does it function? What characteristics should money have?

The Functions and Characteristics of Money 1. The Functions of Money A. Something a seller will accept in exchange for a product or service; a MEDIUM of EXCHANGE. B. Without money, people would have to barter, a much more complicated process involving a double coincidence of wants. C. It is used to measure and compare the values of different items and services; a UNIT of ACCOUNTING. D. Helps to keep accurate financial records. E. It is used as a STORE of VALUE- sell one thing and save its value for use at a later time. (Sell your LABOR… save its value- PAYCHECK- for later)

…explain this… How difficult would it be to measure and compare the values of different items and services without any kind of money? Is this possible?

II. Characteristics of Money A. DURABLE- withstands wear and tear of being passed around B. PORTABLE- easy to carry around C. DIVISIBLE- must be able to divide it into small parts in order to purchase things of differing value D. STABLE VALUE – value does not change over time. E. SCARCE ITEM (so there is not too much of it: helps give value) F. ACCEPTED by the sellers and buyers in a community

…..look at…. The 6 characteristics of money… which of these characteristics better fit coins? Bills?

III. Types of Money A. COMMODITY money has value aside from its value as money. Salt, gold, candy, cigarettes B. REPRESENTATIVE money is backed by, or exchangeable for, a valuable item. Bond, bill, note, token, tickets C. FIAT money has a face value determined through government order and is therefore legal tender. Faith in the system gives value

…. Sooooooo……… With a partner, give 3 examples of EACH type of money. FYI: Bring in a ONE DOLLAR bill tomorrow! 