Study Guide – Lesson 13 (Money & Banking)

Study Guide – Lesson 13 (Money & Banking) - Study...

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Study Guide – Lesson 13 (Money and Banking) What is the definition of money? What is the difference between money that has intrinsic value and fiat currency? Money – Anything that is accepted for payment of goods/services or debt. Fiat currency is what we currently use and it is what the government will accept for payment of taxes. The difference in fiat from money that has intrinsic value is that the fiat currency is going to be universally accepted due to the government’s decree. What are the three functions of money? What problems or challenges do they help to overcome? Medium of exchange – This helps overcome the “double coincidence of wants” challenge that you find with bartering systems. Serves as a unit of account – This reduces the number of prices to be calculated and allows the comparison of different goods/services. Store of value – This allows a person to know how much the currency is worth and that it is perfectly liquid.
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  • Fall '09
  • Macroeconomics, Federal Reserve System, Fractional-reserve banking, Fiat Currency

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