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3 Money
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Did you know….O That the Secretary of Treasury signs
the money printed in the US?O new signature – Click to watch video –
Must be in full screen mode.O What is Money?
O money explained -Click to watch video –Must be in full screen mode.
O How is money made?O reading rainbow -Click to watch video –
Must be in full screen mode.
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Uses or Functions of Money
1. Medium of ExchangeO Readily acceptable- anybody will take itO Decrease transaction costs- it’s worth is given
by the priceO Decreased by tradition or law
O Ex.- Tobacco, furs, crops
2. Unit of Account/Unit of MeasureO Able to measure the value of goodsO Easily divisible
3. Stores of ValueO Can store the purchasing power- ABILITY TO
SAVEO Value varies with the rate of inflation
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Sources Of Money’s Value
1. Commodity Money value as a good (tobacco, wheat, cows)
2. Representative Money money backed by gold or silver- this is the old way
3. Fiat Money declared legal tender by government
because they say so – people accept that the $ have value
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Characteristics
1. Durablecan withstand wear and tearnot made with just paper
2. Portableeasily carried around
3. Divisiblecan easily be divided into small
parts
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Characteristics4. Stable in Value
does not change value rapidlyAble to trust in the Dollar
5. Scarcenot easily or abundantly available
Goes back to our #1 problem of economics
6. Acceptedmust be accepted as a medium of
exchange
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Death to the Penny? O http://youtu.be/y5UT04p5f7U
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BitcoinO A new currency?
O youtube video (older)O What is Bitcoin?
WATCH
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4. Inflation
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InflationO General rise in pricesO Consumer Price Index- measures a group
of goods that a typical consumer would buy. O The HIGHER the CPI number the more unstable
prices areO Numbers over 5% could create/indicate
problems to comeO If your basic needs cost more, what happens to
your secondary expenses?O How can this effect the economy?
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InflationO Types
O Quantity Theory: inflation occurs when too much money is in circulation
O Demand- pull Theory: inflation occurs when the demand for goods and services exceeds existing supplies
O Cost-push Theory: inflation occurs when producers raise prices to meet increased costs
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InflationO Effects
O Purchasing Power: ability to buy goods and services decreases
O Income: If you don’t get a raise but prices increase, what happens?
O Positive Effect: Loans O When you take out a loan for $1,000 you still
only owe $1,000 even though the purchasing power of a $1,000 over time could decrease.
O interest rates-bank’s way to make $ & counter act inflation, next unit
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READ
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Brazil Inflation Case Study
Use the reading to answer the questions on your handout.
Get a stamp!
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Answer the following questions…
1. Why did Brazilians feel their government couldn’t control inflation? __________________ _______________________________________
2. What happens to consumption when inflation becomes an issue?______________________ _______________________________________
3. Do you think Brazil should have abandoned their original currency? __Explain. ________________ ________________________________________
4. Why do you think the URV was so successful? Because…________________________________________________________________________
Get a stamp today!
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STOP
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Answer the following questions…
1. Why did Brazilians feel their government couldn’t control inflation? __________________ _______________________________________
2. What happens to consumption when inflation becomes an issue?______________________ _______________________________________
3. Do you think Brazil should have abandoned their original currency? __Explain. ________________ ________________________________________
4. Why do you think the URV was so successful? Because…________________________________________________________________________