Ch.+10.1


 * 10.1 Outline and answer Questions #1-5, 9**

1. you are able to spend some now and some later, that is how money serves as a store of value 2. a) commodity money- salt, cattle, and precious stones b) representative money- a silver certificate that could be exchanged for silver, an IOU from a sibling that states they will do chores c) fiat money- the money that we use today that are decreed by federal government to be an acceptable way to pay debts 3. Because the federal reserve controls the money supply which is essential for the fiat system to work 4. disadvantages of commodity money is that it is often not portable, durable, or divisible 5. Continentals became worthless because people came to believe that they would not be able to redeem their bills for gold and silver coins.
 * Three Uses of Money**
 * **Money-** anything that serves as a medium of exchange, a unit of account, and a store of 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
 * Money Used as a Unit of Account**
 * **Unit of account-** a means for comparing the values of goods and services
 * in other words, money provides a means for comparing the values of goods and services
 * Money as a Store of Value**
 * **store of value-** something the keeps its value if it is stored rather than used
 * Six Characteristics of Money**
 * **Currency-** coins and paper bills used as money
 * durability, object used as money must withstand the physical wear and tear that comes with being used over and over again
 * portability, people need to be able to take money with them as they go about their daily business
 * divisibility, to be useful money must be easily divided into smaller denominations, or units of value
 * uniformity, any two units of money must be uniform, which means the same, in terms of what they will buy
 * limited supply, if a society uses pebbles as currency and they can only be found on one beach, but one day someone finds an enormous supply of similar pebbles on a different beach, they are now deemed n longer useful as currency
 * acceptability, everyone in an economy must be able to exchange the objects that serve as money for goods and services
 * Source of Money's Value**
 * **commodity money-** objects that have value in themselves and that are also used as money
 * **representative money-** objects that have value because the holder can exchange them for something else
 * **fiat money**- money that has value because the government has ordered that it is an acceptable means to pay debts