ECONOMIC S

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DAY 5

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TODAY = MONEY AND FINANCE

Objectives:

• Describe the functions of money.

• Examine the positive and negative aspects of barter, currency, credit cards, and debit cards .

WHAT IS MONEY?

Think-pair-share: • Money is…

RECAP/REVIEW

• Functions of money

• Characteristics of money

• Types of money

• Credit /Credit Cards

• Debit Cards

MONEY, MONEY, MONEY, MONEY, MONEYWhat functions does money serve?

• Money facilitates the processes of trade, borrowing, saving, investing, and comparing the value of goods and services.

• Money serves as a medium of exchange, unit of account, and as a store of value.

MEDIUM OF EXCHANGE

• Money serves as a medium of exchange for transactions (buying and selling)

o Example: Rather than bartering for goods and services (direct exchange of one set of goods for another), money greatly facilitates the exchange of goods and services

UNIT OF ACCOUNT

• Money allows individuals to compare the values of related and unrelated goods and services.

• As a unit of account, money allows consumers to compare prices in order to determine what goods / services they want to purchase.

This Maserati is $77,900.

STORE OF VALUE

• Money serves as a store of value – something that keeps its value if stored rather than used.

• Although the value of money can fluctuate (one dollar in 1950 had more purchasing power than one dollar in 2010), it is still considered a stable store of value.

CHARACTERISTICS OF MONEY

Currency – coins and paper bills used as money.

CHARACTERISTICS OF MONEY

Six Characteristics of Money

• Durability – money must withstand physical wear and tear that results from repetitive use

• Portability – money must be easy to carry; historically, coins and paper currency has proven to be extremely portable

• Divisibility – to be useful, money must be easily divisible into smaller units of value

• Uniformity – identical units of money must be the same in terms of their value; one dollar in Texas must be worth the same as one dollar in California

• Limited supply – if the amount of currency circulating through the economy is not regulated, confidence in the currency’s value will suffer; counterfeiting is not only illegal because someone might buy goods with fake money, but because if lots of counterfeited money entered into circulation, confidence in the nation’s money supply would dwindle

• Acceptability – Everyone in the economy must be able to exchange the objects that serve as money for goods and services.

CHARACTERISTICS – 3 TYPES

• Commodity Money

• Representative Money

• Fiat Money

IS CREDIT FREE?

Credit cards

o Positives – provides consumers the flexibility to buy goods and pay for them in installments; eliminates the necessity of either carrying currency or checks as a form of payment; convenience; fraud protection; rewards / benefits programs.

o Negatives – high and variable interest rates; annual fees; predatory lending; merchants pass credit card fees on to consumers through service charges or inflated prices.

CREDIT REPORT

Your credit report is a compilation of information about the way you handle debt. It includes information about how much debt you've accumulated, how you pay your bills, where you live, where you work, whether you've filed bankruptcy, and whether you've had a home foreclosed or vehicle repossessed. If it sounds like your credit report contains a lot of information, that's because it does.

Why is your credit report important?

A variety of businesses check your credit report to make decisions about you. Banks check your credit report before approving you for credit cards and loans, including a mortgage or auto loan. Landlords review your credit report to decide whether to rent to you. Some employers check credit reports as part of the application process. Your credit report affects many parts of your life, so it's important that the information included is accurate and positive.

DEBIT CARDS

• Debit cards

o Positives – allows for “plastic transactions,” just as with a credit card; convenience; can be used to withdraw cash from an ATM.

o Negatives – requires the consumer to record the transaction at a later time in order to maintain an accurate bank balance; over-draft fees; less consumer protection against fraud.