[lesson 8] money and its functions

MONEY AND ITS FUNCTIONS

Definition Function

Classification

Definition of Money

What is MONEY ???

Definition of Money

any object accepted as means of exchange within a society

Function of Money

a medium

Function of Money

a mediuma measure

Function of Money

a mediuma measurea standard

Function of Money

a mediuma measurea standarda store

“Money is the matter of functions four

A Medium, a Mesure, a Standard, a Store.”

- William S. Jevon (1919)

Medium of Exchange

People use money

to exchange goods

Medium of Exchange

Money makes transaction easier

Medium of Exchange

Money removes the need for double coincidence of

wants

Measure of Value

Money measures values of goods and service

in its unit of account.

Measure of Value “A unit of account is a

standard numerical unit of measurement of the market value of goods, services, and other transactions.”

Store of Value The value from

consuming goods can be stored in several different ways, one of the best is money.

Store of Value

If you don’t want to spend your money now, you can do it later.

Store of Value

HOWEVER Inflation weakens

the ability of storing value of

money.

Standard of Deferred Payment

Future payments for current purchasesBuying now, paying later

Standard of Deferred Payment

Inflation adjustment: interest rates

Classification of Money

Commodity money

Classification of Money

Commodity money

Token money

Commodity Money

Its value comes from what

made of it

Commodity Money

It is objects that have value in themselves as well as value in their use as money

Commodity Money

GoldSilverCopperShellsCattlesCandy

Token Money

Another name: representative money

Token Money

It doesn’t have real value in itself

Token Money

Its value comes from either the commodity it stands for or from a government regulation or law.

Token Money

Paper moneyCoinsBanknotesCredit cards

Team 7Phuong Nam NguyenThe Thoai Nong

Kim Hoa Tran