Money has 3 uses, Medium of money, Standard of value, and Store of value
1)Medium of Money- What people will get in trade for goods 2)Standard of Money- Allows people to compare the worth of goods & service by how much they cost 3)Store of Money-People save for future use
Commodity Money is any item that has value within itself. Such items are Gold, Silver
Money has 3 different characteristics, one of those is Commodity Money
The 2nd characteristic is Representative Money, this is when items have NO value by themselves but can be exchanged for something of value
An example of this would be like buying a star. You would get a certificate for the star, and not the actual star
The third one is Fiat money-fiat money has value because the government says it has value. An American Dollar would be an example of this
Types of exchange have good and bad things about them.
The good things for the exchange types which are, Barter,Currency, Credit, and Debit: Barter: No cash needed, Currency: Most widely accepted, Credit: Can buy things without money, Debit: Same thing as money.
Bad things for those four exchanges are; Barter: Limited by whats usable, Currency: Limited amount of it, Debit: Limited to what you have in the bank, Credit: Can cause problems not being able to pay
The U.S. chose to abandon the Gold Stanard in the early 1970s, the gold standard backed the money in America giving it worth. Now U.S money is valuable by government say,and nothing else making it less valuable, because if the government falls, so does the money.