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Money The Role of Money • Medium of Exchange – a seller will accept it in exchange for a good or service. –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 value. The Role of Money • Store of Value – individuals can accumulate and save money in order to make large purchases or for later use. 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 silver. 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 money. Example: Cattle, gems, etc… New Vocabulary 1. 2. 3. 4. 5. barter economy money medium of exchange fiat money productivity Productivity and Capital Investment Productivity • 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. 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 • 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 productive. Capital Investment • How might our nation’s investment in the following areas improve productivity and our standard of living? – 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. Professionals • 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 workplace: 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? Questions?