MoneyWhat are the 3 functions of money and which is the most important?

Characteristics of Money

1.Durability-not easily destroyed

2.Portability-easy to carry and transfer

3.Divisibilty-easily divided into smaller amounts

25/5=5

4. Uniformity-all forms of money look similar

5. Limited Supply-the Federal Reserve limits the amount of money in circulation

6. Acceptability-everyone can exchange it for goods and services

Source of Money’s value

Fiat Money- Money that has value because the government has ordered that it is an acceptable means to pay debts

Functions of Money

1.Medium of Exchange-anything that is used to determine value during the exchange of goods and services

2. Unit of Account-means for comparing the values of goods & services

3. Store of Value-keeps its value if you save it