2.1 Functions of Money

for personal finance

where goods and services are exchanged directly for other goods and services without a medium of exchange, like money being used

ex. loaf of bread, shoes, material

Barter System

________ of the barter system ________ the need for a _________ accepted ______ of exchange. This led to the _____ of money.

Inefficiencies

highlighted

university

medium

money

a medium exchange that facilitates the buying and selling of goods and services in an economy

money

Early forms of money included…… Things with inherit value or community acceptance

grains, shells, and livestock

Modern money was born out of _________

necessity

an instrument that represents a standard and agreed upon value, used to purchase goods and services and to pay debts

Medium of Exchange

Medium of Exchange example

When you purchase the vendor trusts the value of the money

Provides. standard numerical unit for market value comparison. Aids in budgeting, accounting and economic planning.

Ex. Apples and Oranges

Unit of Measure

an asset that maintains its value over time without depreciating significantly. Allows for saving and future use. Challenged by inflation but crucial for saving and investing.

Store of Value

must withstand physical wear and tear

digital; longevity and stability of electronic records

Durability

Easy to carry and transport

Digital money: accessible and moveable with internet-enabled devices

Ex. Bills, Coins, wallets, purses

Portability

be able to become smaller units for various transaction sizes

ex. $1, $5, $10, nickels, quarters

Divisibility

Identical units in value and appearance. ensures all units of the same value are equal and accepted

Uniformity

ensures all units of the same value are equal and accepted. oversupply leads to inflation. undersupply makes money scarce. Managed by central banks and monetary authorities

Limited Supply

wide accepted by individuals and businesses. trust and confidence in money’s use in the economy. Supported by “legal tender” laws

Acceptability