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The Role of Money
• Medium of Exchange – a seller will
accept it in exchange for a good or
–Prior to the development of money
people had to barter – exchange
goods and services for other goods
and services.
The Role of Money
• Unit of Accounting – measures and
compares the value of goods and
services to one another.
–We know that a gallon of gasoline is
worth more than a piece of gum
because the gasoline’s dollar value
is greater than the gum’s dollar
The Role of Money
• Store of Value – individuals can
accumulate and save money in order
to make large purchases or for later
Characteristics of Money
• Durable – will last
• Portable – can be easily transported
• Divisible – can be broken down into
smaller units
• Stable in Value – Must not rapidly
change in value.
• Scarce – limited supply.
• Accepted – must be taken as payment
for debt or purchases.
Types of Money
• Representative Money – money that
is backed by or exchangeable for
some commodity, such as gold or
Types of Money
• Fiat Money – money that has a face
value ordered by the government and
deemed Legal Tender (By law must
be accepted for payments)
Types of Money
• Commodities Money – mediums of
exchange that have a value as a
commodity, aside from their value as
Example: Cattle, gems, etc…
New Vocabulary
barter economy
medium of exchange
fiat money
Productivity and Capital
• In economics, productivity is the amount
of output created per unit of input used.
• For instance, labor productivity is
typically measured as output per worker or
output per labor-hour.
– If I go from teaching 20 students per class to
teaching 25 students per class, then I have
increased my productivity.
• Businesses can increase their
productivity by investing in technology
or equipment.
– How might the invention of the copy
machine increased productivity?
– Could cell phones make
businesses more productive?
• Productivity can benefit the consumer by
lowering prices.
– Automobiles, for example, were initially hand
made and only available to the wealthy. As
productivity increased, and the price of
automobiles fell, they became widely
available to the general population.
*Productivity may hurt some people who lose jobs
due to improvements in certain industries.
Capital Investment
• Nations and Businesses invest in capital
to improve productivity.
–Businesses buy equipment and
upgrade technology.
–A nation may invest in forms of
Human Capital (Health, Education,
Job Training) to make the nation more
Capital Investment
• How might our nation’s investment in
the following areas improve
productivity and our standard of
– Healthcare
– Education
– Job Training
Determining Salary/Wages
Labor and Wages
(Read – Do NOT Copy) The type of job
one does and the financial compensation
he or she receives are very important in
our society. Job type is linked to status as
is wealth. While the type of job one
performs is arguably more important
status wise then wealth, both are
important to Americans.
Investment in Human Capital
• How does a company determine the
value of an employee?
– Scarcity/Shortage
– *Skills
– *Education
– *Job Training
* All of these items represent forms of human capital,
which make the worker more productive.
Basic Types of Labor
• Skilled
• Unskilled
• Professional
• Can you guess which labor grade gets
paid the most? The least?
Skilled Labor
• These are workers who have received
specialized training to do their jobs. Some
examples of skilled labor are: carpenters,
plumbers, electricians, business
executives and managers, etc.
Unskilled Labor
• These are workers who have received no special
training and have few specific skills. Examples of
unskilled laborers are construction workers,
sanitation and custodial workers, factory assembly
line workers, etc.
• Arguably the elite of the labor grades,
these are the workers who need an
advanced degree to do their jobs. The
three primary groups of professional are
doctors, lawyers, and teachers.
Workplace Skills
• There are several skills that can make an
individual more successful in the
1. Good Attendance/Punctuality
2. Ability to get along with others.
3. Flexibility: Willingness to adapt/learn new skills.
4. Communications Skills: Oral/Written
5. Leadership Skills
6. Can you think of others?