Personal Economics

Money vs. Currency Money: something that people will accept in exchange for goods or services. Currency: the part of the money supply consisting of coins and paper bills.  Note: Money and Currency is not the same thing.

Money vs. Value Money works as a store of value. The only reason money is valuable to us is that it stores value that we intend to use later.

How do we store value? Currency Banks or other Economic Institutions Money that isn’t Money  Certificates of Deposit  Stocks and Bonds  Money Market Accounts

How do banks work? Savings Accounts Checking Accounts and Debit Cards Loans  Reserve Requirements: Banks are required to keep about 14% of the value they have in money on hand.

How do we use our value? Savings and other future accounts Purchasing Capital  DVD Players, Cars, Clothes Purchasing Services  Cable, Cell Phones Using money to make money  Stock Market and other investments

Purchasing Economic Trade-Offs  The choice between alternative uses for a given quantity of a resource.

Why are economic trade-offs necessary in any economic system? Because of limited resources; an individual or a community cannot get everything it wants. They will need to choose what is more important to them.

Opportunity Costs The real economic cost of a good or service produced measured by the value of the sacrificed alternative.  Example: I can work at McDonalds over the summer or I can teach summer school. My opportunity cost for working at McDonalds is $9/hr. - $26/hr. The opportunity cost is -$17 an hour.

Economic Choices Every individual deals with limitations. We are forced to make decisions about what is important to us and how we want to use the resources we have.  Do I want to study now or go shopping?  Do I want to buy a pop now or save the money until later?  Should I buy one really cool shirt or buy two average shirts?