Money ’t have money? What would happen if we didn

Money
What would happen if we didn’t have money?
What is Money?
Money is anything that is generally accepted in
payment for goods and services.
What would happen if we didn’t have money?
The Barter System: goods and services are traded directly.
There is no money exchanged.
Problems:
In the barter system, before trade could occur, each
individual had to have something the other wanted.
Some goods cannot be split. If 1 goat is worth five
chickens, how do you exchange if you only want 1
chicken?
Three Uses of Money
Medium of Exchange - anything that is used to
determine value during the exchange of goods and
services.
Store of Value - money keeps its value if you decide to
hold on to it instead of spending it.
Unit of Account - money gives us an easy way
to compare the value of goods and services.
ex--> 1 goat = $50 = 5 chickens OR 1 chicken = $10
Six Characteristics
of Money
Durability
Uniformity
Portability
Limited Supply
Divisibility
Acceptability
Three Types of Money
Commodity Money
Representative Money
Fiat Money
Commodity money
consists of objects that
have value in
themselves and are
also used as money.
Representative Money
creates value in objects
because you can exchange
them for something else of
value.
Fiat Money has value
because a
government has
recognized it is an
acceptable means to
pay debts.
Banking
Bank - An institution for receiving, keeping,
and lending money.
National Bank - A government bank, that
issues currency, manages government
funds, and monitors other banks.
Money Supply - All the money available in
the United States economy.
Banks make most of their profit through
collecting interest from people who have
taken out loans.
Private or Business Loan
Mortgage
What is the Difference between a
Debit Card and a Credit Card?
• Debit Card - Used to access your money
from your personal checking account to
exchange for goods and services.
• Credit Card - Bank, Business, or Creditor pays
the bill, and then you pay them back with
interest.
Essentially a short-term loan with a higher
than normal interest rate.
Ex: You buy a shirt with a credit card, VISA
pays the store, you pay VISA the price of the
shirt plus interest and fees.