1. Money and
Banking
Chapter 11

2. --moneyless economy that relies on trade
Barter economy
--moneyless economy that relies
on trade
2X2 Time!!!
Do we still barter today??
Can you think of an instance where people barter?

3. Money Medium of Exchange—something accepted
by everyone as payment for G & S.
Money
Measure of Value-
common denominator
that can be used to
express worth
--dollars and cents
Store of Value-
allows purchasing
power to be saved
until needed

4. For money to be effective it must be limited in supply
2x2 Time!
With Partner: What would happen if there was an unlimited supply of money?
On your own: What would happen if there wasn’t enough money for everybody who needed it?

5. Commodity Money- money that can be used for other purposes besides currency (tea leaves)
Fiat Money- money by government decree and not backed by anything other than consumer confidence

6. Characteristics of Money
Portability
--easily transferred
Durability
--should not deteriorate
when being held as a store
of value

7. Divisibility
--divisible into smaller units
Limited Availability
--money loses its value when
there is too much of it

9. Take out a dollar bill
if you have one.

10. Your Dollar Bill Answer these questions in your notes:
Look at the side with the person’s face on it. What’s the topmost writing on that side of the bill?
Where was your bill printed?
The seal to the left of Washington mentions a Federal Reserve Bank. Which bank does your bill mention?

12. National Currency
--there were over 10,000
different currencies from states
--In 1863 the gov’t issued gold certificates
(currency backed by gold) and in 1886
added silver certificates

13. Advantages of the Gold standards:
1. people felt secure
2. prevented the gov’t from printing too
much money
Disadvantages of the Gold standards:
Gold stock couldn’t keep up w/ growth
People could cash their $ in for all of the
gov’ts gold
3. Value of gold is NOT fixed