The 6 Characteristics of Money

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•The coins and paper used as money are calledCurrency.

•Money must be durable, portable, divisible,uniform, limited in supply, and acceptable.

•Money is something that people use every day.

•We earn it and spend it but don’t often think muchabout it.

•Economists define Money as any good that iswidely accepted as a medium of exchange forgoods and services. It includes currency andDemand Deposits.

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•We want money to be durable so it will beable to last a long time.

•If money was gone too fast or were easilydestroyed, it would not serve well as a“Store of Value.”

•When currency does wear out, new bills andcoins replace the old ones.

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•People need to be able to take moneywith them to do business. From wherethey get the money to where theyspend it.

•Modern currency is small enough andlightweight, easy to carry. Electronicmoney (debit cards, plus online bankingand transactions) are even easier.

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•Divisible means “able to be divided.”

•Many things cost a part of the unit ofmeasurement, so you need to divide prices.

•Not everything costs an even amount, sowhen you buy something you often need toworry about having exact change.

•Setting prices and making change are easybecause of divisibility.

•Divisibility: This relates to money being easilydivided into smaller denominations fortransactional purposes. People will only needas much money as is necessary for theirpurchases, therefore it is necessary for moneyto be easily broken down for different types oftransactions.

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•Money is uniform; one ten dollar bill is just asvaluable as another.

•All money is made very carefully to make surethat bills and coins of the same amount areuniform in size and weight

•If money was not uniform, it might not beaccepted. Counterfeits would be easy to create.We would not have a national use currency.

•Uniformity allows us all to use, and accept aspayment, the same kind or type of money.

•Uniformity: Depending on the different typesof currency that are available, money withinthat specific currency must look the same.This also allows for money to be accepted,counted and measured accurately.

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Why must the Supply of Money be Limited?

•In order to maintain its value, money must havea limited supply.

•If the supply of money was too high then themoney would lose value (inflation). Money hasvalue because it is limited, especially our FiatMoney, and too much would ruin that trust.

•The supply, and therefore the value, of 20-dollarbills—and money in general—are regulated bythe Federal Reserve so that the money retainsits value over time.

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•It is important that everyone in an economyaccepts money in exchange for goods andservices.

•Acceptable means “recognized as having value.”

•You can use your money at a store because thestore owner can spend it elsewhere to buysomething he or she needs or wants.

•If the store did not accept it, what use wouldyour money be?

•Acceptability: In terms of a form of currencybeing accepted within society, money must beaccepted by everyone in the economy. Thisacceptance is for the purpose of the exchangeof money for goods and different types ofservices.

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•Why does money have to be durable?

•Why is it important that money is portable?

•What characteristic allows us to makechange?

•Why must money be uniform?

•What would happen if money wasn’t limited?

•What’s the point of acceptability?

•What do economists define money as?