2.  Money can be anything that has these three things… › A Medium of exchange – must determine value during an exchange  Without money we must barter=trade › A Unit of Account – a means of comparing the values of goods/services. › A Store of Value – Something that keeps value if it is stored rather than used.

3.  Six characteristics of money – tell us how well something could serve as currency 1. Durability – Must be long lasting 2. Portability – must be easy to trade/keep with you 3. Divisibility – must be easily divided 4. Uniformity – must be easily classified 5. Limited Supply – Can’t be easily obtained 6. Acceptability – Everyone must agrees on it

4.  Commodity Money – has another use other then $ › Only seen in simple economies › Ex: Tobacco and cotton served as commodity money in the American colonies. › What characteristics do commodity money lack?

5.  Representative Money – money tha stands for something else. › A sort of IOU › Ex: The US gov’t issued silver certificates that were “backed” by silver. You could exchange the silver certificate for silver at the bank.

6.  Fiat Money – Has value because the gov’t says it is › Money used in the U.S.A. › Federal Reserve gives it value by limiting supply › Your money is useless › Gov’t issues Baruck’s instead of dollar.