Chapter 11 Section 1 • I. Functions of Money • A. Medium of exchange-accepted by everyone • B. Measure of value-common worth • C. Store of Value-purchasing power is saved until needed • II. Money In Early Societies • Commodity money-has an alternative use. • Fiat money – by government decree • III. Money in Colonial America • A. Tobacco and wampum were once accepted forms of currency. • B. States passed laws allowing individuals to print paper currency, which was backed in local banks with gold and silver deposits. • C. During the American Revolution, Continental dollars were issued but without gold or silver backing - which made them worthless. • D. Specie, or gold and silver coins, were commonly used in the colonies. • IV. Origins of the Dollar • A. When the nation began, the most plentiful coin in circulation was the Spanish peso. • B. Benjamin Franklin and Alexander Hamilton differentiated the dollar system from the pesos by dividing the dollar into tenths. Characteristics of Money • A. Portable-easily transferred from one person to another. • B. Durable-lasts when handled or stored for long periods. • C. Divisible to facilitate all types of transactions. • D. Limited supply to retain its value.
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