barter and money Flashcards
what is barter
the exchange of goods and services for other goods and services without the use of money
advantages
allows a variety of goods
surplus
save currency
disadvantages
double coincidence of wants
indivisibility of goods
unequal exchange? exchange rate
store of value
what is money
anything that is generally accepted for the purchase of goods and services usually in the form of notes and coins
earlier forms of money
shells
stones
gold
copper
beads
characteristics of money
acceptability
scarcity/stability
homogeneous
divisibility
durability
portability
functions of money
medium of exchange
standard/measure of value or unit of account
store of wealth
types of money
commodity money
representative money
fiat money
currency
legal tender
what is commodity money
the value of this money comes from a natural resource or good out of which it is made. eg. gold, copper, silver
what is representative money
money that consists of token coins such as certificates that can be reliably exchanged for a fixed quantity of goods.
fiat money
money used as the circulating medium of exchange that is not backed by or easily convertible into any specific commodity, but rather has value because the society assigned it.
currency
coins and paper money
legal tender
money that by law cannot be refused as a medium of exchange
