currency and its implications money in the world…
Post on 19-Dec-2015
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CURRENCY AND ITS IMPLICATIONS
Money in the world…
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Anything accepted as payment4 types of money:
Commodity money
Flat Money
Credit Money
Representative Money
Money in the World
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Commodity Money
Value comes from the commodity which is was made
Can be used as a medium of exchange
Examples: gold, silver, copper, salt, peppercorns, large stone.
A commodity is the same no matter who produces it
Different types of commodities
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Fiat Money
Government declares Fiat money to be legal tender
Because it is considered legal tender, it is made to be used when buying or selling good as well as paying taxes.
Examples: US dollar, Euro, Yuan, and Yen
Has value only by government order
Various paper currencies from around the world
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Credit Money
Claim against a person to purchase goods
Something that is not immediately repayable, a promise of future payment
Examples: credit cards, banknotes,
Consider as an IOUCommon example of credit money
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Representative Money
Money that consists of a claim held elsewhere
Certain amount of valuable metal is stored in treasury while equivalent paper is in circulation
Examples: gold certificates, silver certificates
Metal backed money Gold Certificate
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The different values money takes on in the world
Values
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Exchange Rates
The exchange rate between two currencies compares the currency of one country to the currency of an other in a ratio.
The Foreign Exchange Market trades currencies and makes it easier for a bank to buy and sell currencies.
Values of currencies change depending on the economy of the supplying country
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For example
The conversion rate between one USD and one Chinese Yuan is 1 to 6.826, respectively
The conversion rate between a USD and a British Pound is 1 USD to .628 GBP
Therefore, take into consideration 100 USD. How many Yuan would that be equal to? How many GBP would that be equal to?
100 USD = 682.6 Yuan = 62.8 GBP
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How stable IS the economy?
Stability
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Economic Stability
An economy is said to be stable when there is minimal inflation as well as constant output growth.
When a certain economy is unstable, it is said to have frequent large recessions and very high variable inflation.
Although the USA is currently in a recession, it is considered economically stable. Germany as well as Japan are also two very economically stable countries.
Fluctuation in the macro economy
Economically stable countries
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History behind money
First began using barter-like methods
Many cultures later developed commodity money
This system then evolved into using representative money
Paper money was then used after the notes of representative money were eventually made legal tender
Now, money can be used in many different ways including the purchasing of goods over the internet using credit cards
History of money Money growing!
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COUNTERFEIT MONEYThe illegal reproduction of money
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Fraud
The illegal production or replication of currency is considered fraud.
Counterfeiting is as old as money itself.
Clipping Modern counterfeiting
includes the reproduction of paper money
Can be used as a means of warfare
Can cause the value of real money to decrease
Inflation due to the over circulation of money
Companies can lose money because they do not get reimbursed if counterfeits effect them
Counterfeit money Effects on society