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Understanding Money: Functions and Characteristics

Discover the functions and characteristics of money, such as medium of exchange, measure of value, store of value, portability, durability, divisibility, limited availability, and stability. Learn what gives money value and whether U.S. currency is backed by gold or silver. 8

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Understanding Money: Functions and Characteristics

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  1. Functions and Characteristics of Money

  2. What are the Functions of Money? • 1) Medium of exchange – accepted as payment for goods and services • 2) Measure of value/Unit of Accounting – Worth in terms (U.S. uses $) • 3) Store of value – can be converted into money, which easily stored until future time (work first, then get paid)

  3. Characteristics of Money • Portability – easily transferred from one person to another • Durability – lasting; won’t wear out • Divisibility – break down into smaller units; use whatever amount in any transaction • Limited Availability – Available; but in limited supply • Loses value if too much in circulation (inflation)

  4. Characteristics of Money • Accepted – medium of exchange • Stable in Value – cannot change rapidly

  5. What gives MONEY value?

  6. Is U.S. Currency backed by gold or silver?

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