Its all about the Its all about the Benjamins!Benjamins!

But…..why?But…..why?

Money! Why do we care?Money! Why do we care?

Ever look at a dollar bill?Ever look at a dollar bill? What makes it so special?What makes it so special? Its just green paper.Its just green paper. There must be something There must be something

unusual or unique about paper unusual or unique about paper currency that makes it valuable. currency that makes it valuable.

After all, its just green paper.After all, its just green paper.

Well…lets think for a minuteWell…lets think for a minute

What exactly is the purpose of What exactly is the purpose of money?money?

So, we can say money has 3 So, we can say money has 3 main Functions.main Functions.

A medium of exchangeA medium of exchange A store of valueA store of value A standard of valueA standard of value

What do they mean though?What do they mean though?

Medium of ExchangeMedium of Exchange

This seems obvious.This seems obvious. Ever try to barter something?Ever try to barter something? It’s a pain in the butt.It’s a pain in the butt. Instead, why not just exchange Instead, why not just exchange

purchasing power?purchasing power? It makes a great deal more sense.It makes a great deal more sense. Money represents that purchasing Money represents that purchasing

power.power.

Store of ValueStore of Value

Money is great. It keeps it value Money is great. It keeps it value if you decide to hold on to it.if you decide to hold on to it.

Months, even years later, it is Months, even years later, it is still worth basically the same still worth basically the same thing.thing.

Of course, inflation and deflation Of course, inflation and deflation can play into this.can play into this.

Standard of ValueStandard of Value

How many goats is your car How many goats is your car worth?worth?

You don’t know? Neither do I.You don’t know? Neither do I. That is because goats are not a That is because goats are not a

standard of value.standard of value. Money lets us express the value Money lets us express the value

of things in currency terms.of things in currency terms.

But we aren’t done yet!But we aren’t done yet!

Coins and paper bills are known Coins and paper bills are known as currency. But we have had as currency. But we have had many different types of money in many different types of money in history.history.

There are six characteristics that There are six characteristics that economist use to determine how economist use to determine how useful a particular thing would useful a particular thing would be as currency.be as currency.

Six Characteristics of MoneySix Characteristics of Money

DurabilityDurability PortabilityPortability DivisibilityDivisibility UniformityUniformity ScarcityScarcity AcceptabilityAcceptability

The First ThreeThe First Three

DurabilityDurability Money must withstand physical Money must withstand physical

wear and tear.wear and tear. PortabilityPortability

Money must be able to be Money must be able to be transported easily.transported easily.

DivisibilityDivisibility Money must be easily divided into Money must be easily divided into

smaller denominations.smaller denominations.

The Last ThreeThe Last Three

UniformityUniformity Any two units of money must be the Any two units of money must be the

same in terms of what they will buy.same in terms of what they will buy. ScarcityScarcity

Money supply must be carefully Money supply must be carefully controlled.controlled.

AcceptabilityAcceptability Finally, everyone in the economy must Finally, everyone in the economy must

accept the currency to be money.accept the currency to be money.