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3 Money COPY
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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
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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
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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
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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
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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
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Death to the Penny? O http://youtu.be/y5UT04p5f7U http://youtu.be/y5UT04p5f7U WATCH
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Bitcoin O A new currency? O youtube video (older) youtube video O What is Bitcoin? What is Bitcoin? WATCH
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4. Inflation COPY
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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
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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
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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
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READ
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Brazil Inflation Case Study Use the reading to answer the questions on your handout. Get a stamp! READ
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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!
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STOP
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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…___________________________________ _____________________________________
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