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Section One
The basis of the market economy is voluntary exchange. Historically in other economies money has been made of everything from bones, whales teeth, to sheep. Three Functions of Money: *medium of exchange *unit of accounting *store of value
Dough!
Characteristics of Money
Durable: must be able to withstand wear and tear in exchange Portable: money must be easy to carry Divisible: money must be able to be divided into smaller parts so change can be given Stable in Value: money must be stable in value; can t change rapidly Scarce: whatever is used as money must be scarce, that is what gives it value Accepted: must be accepted as a medium exchange in payment of debts
Types of Money
Commodity Money: oil, cattle, foods, gems Representative Money: money backed by gold or silver Fiat Money: face value occurs through government order, it is declared legal tender