Functions and Characteristics of Money

Money, money, money, money . . . money!  Listen to "For the Love of Money" by the O'Jays or "Money" by Pink Floyd.

Part 1: Introduction to Money

Brainstorm to fill in the two columns on the whiteboard labeled "Functions of Money" and "Characteristics of Money." 

Then, watch "What is Money?" movie (~20 min) to see what other students think and to learn the three functions and six characteristics of money.  While you are watching the movie, answer the 10 questions on your Money and Banking 101 worksheet. 

Money

Money is anything widely accepted as payment for final goods and services.

Functions of Money:

• Medium of Exchange

• Store of Value

• Unit of Account

Characteristics of Money:

• Divisible

• Portable

• Acceptable

• Scarce

• Durable

• Stable

Money (With Definitions)

Money is anything widely accepted as payment for final goods and services.

Functions of Money:

• Medium of Exchange

  • Money acts as a go-between to make it easier to buy things. Sellers agree to accept it in exchange for a good or service.

• Store of Value

  • When people hold money in their wallet, they are using money to maintain value until they want to exchange that value for a good or service.

• Unit of Account

  • Money serves as a way to measure and compare the value of goods and services in relation to one another. When comparing prices, individuals can determine if one good is a better buy than another. Money also allows people to keep accurate financial records.

Characteristics of Money:

• Divisible:

  • Money must be easily divided into small parts so that people can purchase goods and services at any price.

• Portable:

  • Money must be easy to carry.

• Acceptable:

  • Money must be widely accepted as a medium of exchange.

• Scarce:

  • Money must be relatively scarce and hard for people to obtain.

• Durable:

  • Money must be able to withstand the wear and tear of many people using it.

• Stable:

  • Money’s value must remain relatively constant over long periods of time.

Part 2: What is Money Card Game

With your table group, use the Cards (pages 7-8) to play a matching card game.

1. Read each scenario and associated question card from the deck.

2. Match that scenario and question card with the function or characteristic of money card that best fits the scenario.

3. Organize the cards so they can be easily viewed and shared with class.

As a class, review the correct answers to the card matching game.

Look back at the table on the whiteboard that we created at the start of the lesson.  Circle the items (functions and/or characteristics of money) that turned out to be correct.

Part 3: Assessment

As a class, discuss the following items.

1. During different periods of history, in different parts of the world, salt, paper money, and livestock have all been used as money.  Which is most portable?

2. What makes paper money divisible in today's economy?

3. Which of the three historic forms of money listed here is most durable and why?

4. Why aren't salt and livestock relatively scarce?

5. Which of the three historic forms of money is the only one widely accepted in our economy?

6. Is our money relatively stable in value?  How do you know?

Complete the written assessment (page 9). 

See full lesson plan from Philadelphia Federal Reserve

Also see "The Federal Reserve and You" webpage.