3 Money COPY

Did you know…. O That the Secretary of Treasury signs the money printed in the US? O new signature – Click to watch video –Must be in full screen mode. new signature O What is Money? O money explained -Click to watch video –Must be in full screen mode. money explained O How is money made? O reading rainbow -Click to watch video –Must be in full screen mode. reading rainbow WATCH

Uses or Functions of Money 1. Medium of Exchange O Readily acceptable- anybody will take it O Decrease transaction costs- it’s worth is given by the price O Decreased by tradition or law O Ex.- Tobacco, furs, crops 2. Unit of Account/Unit of Measure O Able to measure the value of goods O Easily divisible 3. Stores of Value O Can store the purchasing power- ABILITY TO SAVE O Value varies with the rate of inflation COPY

Sources Of Money’s Value 1. Commodity Money value as a good (tobacco, wheat, cows) 2. Representative Money money backed by gold or silver- this is the old way 3. Fiat Money declared legal tender by government because they say so – people accept that the $ have value COPY

Characteristics 1. Durable can withstand wear and tear not made with just paper 2. Portable easily carried around 3. Divisible can easily be divided into small parts COPY

Characteristics 4. Stable in Value does not change value rapidly Able to trust in the Dollar 5. Scarce not easily or abundantly available Goes back to our #1 problem of economics 6. Accepted must be accepted as a medium of exchange COPY

Death to the Penny? O WATCH

Bitcoin O A new currency? O youtube video (older) youtube video O What is Bitcoin? What is Bitcoin? WATCH

4. Inflation COPY

Inflation O General rise in prices O Consumer Price Index- measures a group of goods that a typical consumer would buy. O The HIGHER the CPI number the more unstable prices are O Numbers over 5% could create/indicate problems to come O If your basic needs cost more, what happens to your secondary expenses? O How can this effect the economy? COPY

Inflation O Types O Quantity Theory: inflation occurs when too much money is in circulation O Demand- pull Theory: inflation occurs when the demand for goods and services exceeds existing supplies O Cost-push Theory: inflation occurs when producers raise prices to meet increased costs COPY

Inflation O Effects O Purchasing Power: ability to buy goods and services decreases O Income: If you don’t get a raise but prices increase, what happens? O Positive Effect: Loans O When you take out a loan for $1,000 you still only owe $1,000 even though the purchasing power of a $1,000 over time could decrease. O interest rates-bank’s way to make $ & counter act inflation, next unit COPY

READ

Brazil Inflation Case Study Use the reading to answer the questions on your handout. Get a stamp! READ

Answer the following questions… 1. Why did Brazilians feel their government couldn’t control inflation? __________________ _______________________________________ 2. What happens to consumption when inflation becomes an issue?______________________ _______________________________________ 3. Do you think Brazil should have abandoned their original currency? __Explain. ________________ ________________________________________ 4. Why do you think the URV was so successful? Because…___________________________________ _____________________________________ Get a stamp today!

STOP

Answer the following questions… 1. Why did Brazilians feel their government couldn’t control inflation? __________________ _______________________________________ 2. What happens to consumption when inflation becomes an issue?______________________ _______________________________________ 3. Do you think Brazil should have abandoned their original currency? __Explain. ________________ ________________________________________ 4. Why do you think the URV was so successful? Because…___________________________________ _____________________________________