1 / 6

Understanding the Nature and Value of Money: A Comprehensive Overview

Money plays a crucial role in our economy, serving three primary functions: a medium of exchange, a unit of account, and a store of value. This article discusses the six characteristics of effective money, including durability, portability, divisibility, uniformity, limited supply, and acceptability. It explores different types of money—commodity money, representative money, and fiat money—highlighting their historical and practical significance. Understanding what constitutes "good" money and why it is valuable is essential in navigating modern economic systems.

sasha
Télécharger la présentation

Understanding the Nature and Value of Money: A Comprehensive Overview

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. What is money? 11/8/2009

  2. Money • 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. How do we decide what makes “good” money? • Six characteristics of money – tell us how well something could serve as currency • Durability – Must be long lasting • Portability – must be easy to trade/keep with you • Divisibility – must be easily divided • Uniformity – must be easily classified • Limited Supply – Can’t be easily obtained • Acceptability – Everyone must agrees on it

  4. Why is money valuable? • 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. Types of money and value • Representative Money –money thastands 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. Types of money and value • 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.

More Related