Chapter 4: Lesson 1 and 2

Money and Its Types:

 Before the emergence of money, people used the barter system which
means exchanging one good or service for another.
 Precious metal such as silver and gold have had wide monetary use due to
their convenience of handling, durability and high value.
 300 years ago, money appeared. It was referred to as Fiat money.
 Money can be defined as an asset recognized by the economic community
as something that has value.
Functions of money:
1. Money as a medium of exchange. Money is used as means to complete a
transaction. That’s why; it encourages specialization, division of labor and
economic efficiency.
2. Money as a measure of value: Money makes transaction simpler, as
market determine the price of goods not people.
3. Money serves as a store of value: It can be exchanged quickly for goods
and services.
Types of money:
1. Commodity money: Money is based on the value of a certain material like
gold, silver, rice, and cigarettes.
2. Representative money: Certificates and digital certificates that can be
exchanged for a certain amount of commodity like gold. It has a fixed
relation to the commodity that backs it.
3. Fiat money: It is the money that governments accepts it as a legal means
of payment.
4. Credit money: It is the money whose value at the time of payment is not
equal to the value at the time of the purchase.
5. Electronic money: Payment systems used in electronic commerce to pay
for online orders through secure accounts with specialized institutions.