Econ 14 by Ma5vn8


									Section 1: The Functions and
   Characteristics of Money
 Cattle, Chattle, Capital-   all from same
  root word
 Sal (Salt) Salary
       functioned as money in
 Silver
 Mesopotamia. It acted as a means of
 exchange, a way to store wealth, and a
 way to define value
"The average well to do woman wore golden earrings
  (sometimes large) and silver rings on the arms and
  the feet. Those silver rings have a standard weight
  (5 shekels...) identical with standard fractions of the
  brideprice, and it is possible that the rings actually
  represented the price paid."
  "Women in Mesopotamia," by M. Stol Journal of the
  Economic and Social History of the Orient, Vol. 38,
  No. 2, Women's History (1995), pp. 123-144.
  [Bolding, mine.]
 The  Aztecs of Central America used cacao
  beans, from which chocolate is made, as money.
  Prices varied from a few beans for a piece of
  fruit to several thousand for an enslaved
 Aztec merchants had to take care when selling
  expensive items. Payment usually came stored
  in sacks, and the sacks might contain
  counterfeit money- bean husks filled with mud.
 Silver, gold, wheat, barley, grain, cattle,
  beans, coins, and now paper
 Weights and measures establish value
 When people pay a certain amount of
  money for something, they expect the
  value of what they get in return to be
  equal (Baker’s Dozen)
 Medium    of exchange
 Unit of Accounting
 Store of value
 Useof money in exchange for goods or
 Use  of money as a yardstick (measure)
  for comparing the values of goods and
  services in relation to one another.
 Ex.: If one i-pod costs more than another,
  the indication is that the more expensive
  one is a better product
 Use  of money to store purchasing power
  for later use.
 Why is this function of money important?
 (Hint: it’s why paper money/ durable
  goods work better as money)
 Anything  that people are willing to
  exchange/ accept in exchange for goods.
  See exs. Above.
 Durable, portable, divisible, stable in
  value, scarce, accepted.
 Commodity   Money
 Representative money
 Fiat Money legal tender
A medium of exchange such as cattle or
 gems that have value aside from being
 Money backed by- or exchangeable for-
 a valuable item such as silver or gold.
 Money  that has value because a
 government fiat, or order, has established
 it as acceptable for payments or debts.
 Hence, fake money is counter- fiat, or
 Throughout    the history of the US, Americans
  have used all kinds of money
 During the Civil War, the Federal Govt.
  finally set up a uniform currency for the
 In order to regulate the money supply,
  Congress established the Federal Reserve
  System in 1913. The Federal Reserve
  became the nation’s central bank, issuing
  federal reserve notes, the currency we use
 In1934, during the Great Depression, the
  Federal Government switched from a
  gold standard to a fiat money standard
 Today, banking has been transformed by
  electronics- Electronic Funds Transfer,
  ATM’s, and Internet banking
 Money   and Near Moneys
 • Currency
 • Checks
 • Credit cards and Debit Cards
 • Near Moneys
 Money   you physically hold
 Issuedby the bank, they can be used to
 transfer money to someone else without
 physically handing them currency
 Credit Card- A card issued to you by a
  bank that is essentially loaning you
  money to pay someone else at a price
  (interest rate)
 Debit Card- A card that is issued to you
  by your bank in the place of a check
  book. You use it to electronically transfer
  funds to the company that you are
  purchasing goods or services from.
 Moneyvalue held in stocks or savings
 accounts that can be easily accessed to
 get money to pay your bills
 Very hard to calculate because money is
  always in a state of flux
 M1= money that can be spent
  immediately and against which checks
  can be written
 M2= M1+near moneys

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