chapter 10: money and banking Flashcards
anything that people will accept as payment for goods and services
money
money must serve as
medium of exchange, standard of value, and store of value
without money economic transactions must be made through
barter
barter is inefficient because
two people who want to barter must at the same time want what the other has
what allows for the precise and flexible pricing of goods and services, making any economic transaction convenient
money
means through which goods and services can be exchanged
medium of exchange
exchange of goods and services without using money
barter
basic monetary unit in US
dollar
determines the economic worth in the exchange pricess
standard of value
because of store of value
people do not have to spend all their money at once or at one place
money does not function well as store of value when
the economy experiences significant inflation
something that holds its value over time
store of value
physical properties of money
- durability
- portability
- divisibility
- uniformity
economic properties of money
- stability of value
- scarcity
- acceptability
types of money
- commodity
- representative
- fiat
derives its value from the type of material from which it is composed
commodity money
backed by something tangible
representative money
declared by the government and accepted by citizens to have worth
fiat money
something that has a value for what it is
commodity money
most common use of commodity money throughout history has been
coins made from precious metals
one problem with commodity money is
if the item becomes too valuable, people will hoard it rather than circulate it
commodity money is _______ used today
rarely
paper money that can be exchanged for something else of value
representative money
government got involved by
regulating how much metal needed to be stored to back up the paper money
