2.  What is money?  To an economist, anything that serves as a medium of exchange, unit of account, or a store of value.

3.  Why do you think bartering would not be practical in our economy?  Because money needs to be a… 1. Medium of exchange: Widely accepted by everyone. A teacher does not want to be paid 300 bananas for a days work. Eliminates the need to BARTER

4.  Money must also act as a… 2. Unit of Account: A means for comparing the value of a good or service. Example: We say money is a “unit of account” because we can use it to compare the price of different items. We don’t have to determine how many shirts are required to buy a car. (PROVIDES A COMMON DENOMINATOR)

5.  Money must also serve as a…  3. Store of Value: Something that keeps its value of it is stored rather than used.  Example: If you store your money in the bank to save for a car, it is acting as a “store of value”.  Think about it, a bartering economy would be awful if you were trying to store your “money”.

6. 1. Progressive Tax – The percentage paid in taxes increases as income increases (Income tax in the United States). 2. Proportional/Flat Tax – The percentage paid in taxes is the same at all wage levels. 3. Regressive Tax – The percentage paid in taxes decreases as income increases.

7. 1. Diana earns $100k per year and pays $30k in taxes, while Maya earns $50k per year and pays $10k in taxes. What kind of tax is this? 2. Tyriq earns $100k a year and pays $25k in taxes, while Giselle earns $80k and pays $20k in taxes. What kind of tax is this?

8. Expansionary Policy means we want to increase the money supply. Expansionary Fiscal Policies: 1. Lower Taxes 2. Increase Spending Expansionary Monetary Policies: 1. Lower interest rates (discount rate) 2. Buy Bonds 3. Lower the reserve ratio

9.  Contractionary Policy means we want to decrease the money supply.  How we use contractionary policy is exactly the opposite of expansionary policy (from last slide).  IMPORTANT LAST VOCAB:  Open-Market Operations – When the Federal Reserve banks buys and sells bonds.