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Ch 10 sec 1

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by

Amber Lucas

on 29 April 2010

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Transcript of Ch 10 sec 1

The three uses of Money The six characteristics of MOney Sources of money's value Vocabulary Chapter 10 Section 1: Money Money as a medium of exchange Money as a unit of Account Money as a Store of Value People acquire good and services through barter Example: A person might agree to help paint a neighbors house in exchange for a few dollars Money provides a means for comparing the values of goods and services Money keeps its value even if you decide to hold on to it, or store it instead of spending it Money serves as a good store of value with one important exception; when economies experience a period of rapid inflation Money- anything that serves as a medium of exchange, a unit of account, and a store value Medium of exchange- anything that is used to determine value during the exchange of goods and services Barter- the direct exchange of one set of goods or services for another Unit of account- a means for comparing the values of goods and services store of value- something that keeps its value if it is stored rather than used currency- coins and paper bills used as money commodity money- objects that have value in themselves and that are also used as money represenative money- objects that have value because the holder can exchange them for something else of value Fiat money- money that has value because the government has ordered that it is an acceptable means to pay debts Durability Portability Divisibility Uniformity Limited supply Acceptability If money wears out or is easily destroyed, it cannot be trusted as a store value Paper money and coins are very portable, because they are small and light To be useful, money must be easily divided into smaller denominations, or units of value Any two units of money must be uniform People must be able to count and measure money accurately In the United states, the Federal Reserve System controls the supply of money in circulation In the United states, we expect that other people in the country will contiue to accept paper money and coins in exchange for our purchases Commodity MOney Represenative Money Fiat Money Consists of objects that have value in and of themselves and that are also used as money Lacks several characteristics that make objects good sources of money, such as; not portable, durable, or divisible Only works in simple economies Makes use of objects that have value because the holder can exchange them for something else of value Also called legal tender Has value because the government has decreed that is an acceptable means to pay debts
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