Chapter+10+HW

Chapter 10 Notes Key Terms 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 Unit of Account: a means for comparing the values of goods and services Store of Value: something that keeps its value if it is stored rather than used Currency: coins and paper bills used as money 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 of value Fiat Money: money that has value because the government has ordered that it is an acceptable means to pay debts

The Three Uses of Money Money as a Medium of Exchange - anything that is used to determine value during the exchange of goods and services - without money people acquire goods and services through a barter - barters are used especially in traditional economies

Money as a Unit of Account - money provides a means for comparing the values of goods and services

Money as a Store of Value - money keeps its value if you decide to hold onto it or store it instead of spending it - one exception is when economies experience a period of rapid inflation or general increase in prices

The Six Characteristics of Money - coins and paper bills used as money are called currency

Durability - withstand wear and tear that comes with being used over and over again

Portability - people need to be able to take money with them where ever they go - paper money and coins are very easy to carry around because they are small and light

Divisibility - money is easily divided into smaller denominations

Uniformity - people must be able to count and measure money accurately

Limited Supply - the Federal Reserve System controls the supply of money in circulation

Acceptability - everyone in the economy must be able to exchange the objects that serve as money for goods and services

Source's of Money's Value - money's value depends on whether the money is a commodity, representative, or fiat money

Commodity Money - commodity is an object; consists of objects that value