Today In Class You will need a Econ book during class. Finish test corrections (10 minutes) Unit 3 Vocabulary – Due November 3 – Quiz & Flash cards Notes – What is Money (20 Minutes)

Money In this lesson, students will be able to identify characteristics of money. Students will be able to identify and/or define the following terms: Money Commodity Money Representative Money Fiat Money

We use it every day but what is money?

Money Money is a medium of exchange, a unit of account, and a store of value. As a medium of exchange, money measures value during the exchange of goods and services. What is the value of a sweater?

When we purchase a sweater, we use money as a medium of exchange.

Money, Again As a unit of account, money is a way to compare the value of goods and services. A more expensive sweater is considered more valuable than a cheaper sweater. Finally, money is a store of value. Money holds its value even if it is not used though inflation affects money.

An expensive price tag tells us something about the good’s value.

And if we don’t spend it today, that’s O.K., too. Money is a store of value. It keeps its value unless inflation occurs.

But I don’t have to tell you about inflation. You know all about rising prices. You’ve been to the gas station.

Not All Money is the Same Commodity money can be used as money but also has value in itself. An example of commodity money is salt. Salt was once used in some societies as money. Salt could be used as money or eaten.

Long ago, in some societies, salt was used as money. Salt is an example of commodity money. Salt can be used as money or eaten.

Representative Money Representative money is another type of money. An example of representative money is an I.O.U. The paper that the I.O.U. is written on can be exchanged for something valuable.

Our dollars were once backed by gold. You could exchange a dollar for gold.

Fiat Money Fiat money is our money today. Our money is money because the government states that it is an acceptable means to pay debts. In other words, its money because the government says so.

Its money because the government says so. Its fiat money.

Six Characteristics of Money Do we use pigs as money or paper as money? How does a society decide? There are six characteristics of good money. Money should be portable, divisible, durable, uniform, accepted, and have a limited supply. Too much money in circulation means less value.

Questions for Reflection: What is money? Explain each of the three functions of money. Provide an example of commodity money. What is representative money? How does fiat money differ from commodity money and representative money?