True or False Our monetary system developed to meet the changing needs of the economy.

True or False Primitive economies consisted largely of self-sufficient units or groups that lived by means of hunting, fishing, and simple agriculture.

The need for a simple means of exchange led to the _______________. Thus, money became a MAJOR TOOL for __________.

defined as anything authorized by law to be generally accepted as a medium of exchange and a standard of value and has no reference to the general standing of the person who offers it as payment for goods and services (Alminar-Mutya, 2017)

Without money, individuals would have to devote more time to buy what they want and sell what they do not want. Workers are paid in money, which they can use to pay bills and make purchases.

Goods and services are then expressed in terms of money, a common denominator. One of the most important things about ______________ is that everyone must be confident that it can passed on, that it is generally acceptable in trade.

It frees people from spending much time bartering goods and services and allows them to pursue other endeavors.

It does this by stimulating both savings and investment and facilitating transfers of funds from savers to borrowers, who want to invest by do not have enough money to do so. Financial markets give savers a variety of options to lend and borrowers, thereby increasing the volume of both savings and investment and encouraging economic growth.

Money facilitates buying and selling. It is used to pay for or settle obligations. Because it is acceptable as payment for goods and services, it serves as a physical means for conducting business transactions. The use of money makes purchases and sales possible. o In addition, money reduces the time spent on a transaction. o As a transaction medium, money is a means of repaying debts or exchange of assets such as shares of common stock. o Throughout history, the medium of exchange has taken many forms-commodities, precious metals, paper and even mere entries in ledgers (accounts). Societies began to designate as media of exchange commodities that were nonperishable, divisible, grain, stones and metals. Soon, these items were replaced by precious metals, such as silver and gold, which were in use until the twentieth century. o The prolonged used to money as a commodity suggests that a medium of exchange must be SCARCE for it to be valuable, DIVISIBLE for it to be used for small and large purchases, PORTABLE for it to be carried around by traders, and NON-PERISHABLE (STORABLE) for it to last over time. o Precious metals, especially gold, were commodities of choice, but the limited supply required monetary authorities to devise new forms of money, like paper money, the supply of which can be increased easily and inexpensively.

Money serves as a yardstick for measuring prices and values when comparing items. In principle, any commodity can serve as a unit of account. o Goods and services are expressed in relative values of money. Their prices are related to the value of money, which serves as measuring stick. o When measuring weight, kilo is the unit of account, when measuring distance, kilometer. Similarly, when we measure the value of a haircut or a steak, we employ a unit of account, that is, the amount of money needed to acquire the product or service. We measure the values of items we want to acquire in terms of one commodity-money.

o Money is a reservoir of future purchasing power. It is both a temporary and a permanent store of purchasing power. o A person who saves a portion of his income is storing the purchasing power of his money temporarily. A person who puts in more money to carry out a transaction in stocks, bonds, or real estate is also storing the purchasing power of money. o The ability of money to serve as a store of value depends on its capacity to retain its purchasing power. When the purchasing power of money drops, as when the prices of goods and services rise rapidly, the public does not want to hold money as a permanent store or value and even shortens the amount of time it holds money as a medium of exchange. o Money value can be stores in TWO FORMS: SAVINGS and INVESTMENT. Income derived from savings is interest and that from investment is profit. If money is kept for future use in the form of savings or investment, it earns income. o In an economy with developed financial institutions, there exists a multitude of financial assets which serves as a means of storing wealth, including various types of short-term securities, bank deposits and stocks.

o Money is used as a medium for fulfilling obligations of debtors to creditors on maturity. o It serves to measure the extent of obligations by debtors and claims by creditors. o Money as the standard of deferred payment means that promises to pay at are expressed in money value.

This is the ready acceptance of money by people of a country. Money must be acceptable as a tool for settlement of obligations between creditors and debtors or between buyers and sellers.

_________ of the New Central Bank Act, Legal Tender Power states, “All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the Monetary Board, COINS shall be legal tender in amounts not exceeding Fifty pesos (P50) for denominations of ________ and above, and in amounts not exceeding Twenty pesos (P20) for denominations of _______ or less.

Money must be able to bear normal wear and tear when used in any transaction. It must be made of materials which can last for a reasonably long period of time without losing its usefulness as a medium of exchange. Designs and inscriptions therein must be visible and recognizable.

_______of the New Central Bank Act, Retirement of Old Notes and Coins, states: The Bangko Sentral may call in for replacement notes of any series or denomination which are more than ______ years old and coins which are more than ______ years old. This property enables coins and paper bills to serve the store value function effectively.” Central Bank may demonetize notes and coins in circulation as the Monetary Board deems necessary.

Money must be easy to carry for faster settlement of transactions. Materials used, like metal alloys, must not be heavy. For higher denominations, paper-based materials are preferable for easy transport.

Money, as unit of account, must lend itself to being divided into smaller denominations to settle obligations or collections arising from various transactions.

________ of the New Central Bank Act, The Peso - The unit of monetary value in the Philippines is the "peso," which is represented by the sign "P". The peso is divided into one hundred (100) equal parts called "centavos," which are represented by the sign "c".

The purchasing power of money must be maintained for a period of time to maximize economic development and increase employment, production and income levels.

Section __ of the New Central Bank Act, International Monetary Stabilization – The Bangko Sentral shall exercise its powers under this Act to preserve the international value of the peso and to maintain its convertibility into other freely convertible currencies primarily for, although not necessarily limited to, current payments for foreign trade and invisibles.

Section __ of the same Act, International Reserves – In order to maintain the international stability and convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies. In judging the adequacy of the international reserves, the Monetary Board shall be guided by the prospective receipts and payments of foreign exchange by the Philippines. The Board shall give special attention to the volume and maturity of the Bangko Sentral's own liabilities in foreign currencies, to the volume and maturity of the foreign exchange assets and liabilities of other banks operating in the Philippines and, insofar as they are known or can be estimated, the volume and maturity of the foreign exchange assets and liabilities of all other persons and entities in the Philippines.

Good money must be easy to recognize. Each denomination must be distinct to avoid confusion with other denominations during exchange transactions. Weight, fineness, designs and other characteristics of coins and notes, as prescribed by the Monetary Board, must be unique for a denomination.

Money of the same denomination must have the same characteristics in terms of weight, fineness, and designs. Coins of the same denomination must have uniform weight of metal alloy, fineness, shape, size and inscriptions. Paper bills of the same denomination must possess uniform design, size, color and other physical characteristics.

Materials for the minting of money must lend themselves to being stamped with proper designs and must be durable to maintain its form. The form and design of coins are a compromise of objectives. The least wear and tear can be attained by a spherical form and a minimum design, but such would be awkward to handle, difficult to recognize, and easy to counterfeit. The design of the coin is a compromise between the artistry of high relief and the exposure of abrasion. Pure gold and silver are very soft, so it is necessary to harden them by adding copper, nickel, tin or zinc. While still malleable, the harder the material, the less wear-and-tear and the possibility of counterfeiting.

● The inconvenience of the barter system forced the creation of a common medium or commodity to facilitate exchange. ● Money evolved from simple forms or thins with intrinsic value, such as rice, corn, wheat, salt, tobacco, sugar, copper, wire, gold, and silver. ● Early men used these commodities as money. Since there was no uniformity in the use of commodities as money, the following factors were considered: a. General acceptability at the place and time b. Utility rather than as medium of exchange c. High demand d. Limited supply ● When commodities were used as medium of exchange, goods could be valued in terms of the item used as money and could be exchange for it. This process was still cumbersome and time-consuming as some items were bulky and difficult to carry around.

● Due to economic development and an improved standard of living, people wanted a better medium of exchange. Metals proved to be more efficient. ● Copper, iron, tin and lead were the earliest metal used as money and were in the form of useful implements such as knives, forks, pots, spears, bows and arrows. ● When supply of gold and silver became abundant (3,000 B.C.), they used as form of money. ● The transition from the use of commodities as money to the use of precious metals eventually led to the general usage of the latter. ● Gold and silver were in great demand for ornamentation because of their durability, malleability, and beauty. The supply of these metals was limited and they had great value, which made them a valuable medium of exchange. ● In time, coins with a certain weight of metal in them were developed, and coining money and determining its value became a governmental function. ● In the evolution of money, the following properties favored the use of metallic coins and eliminated other commodities as material for money: a. Scarcity and stability of metal supply b. Durability c. Divisibility d. Availability in convenient units

● Gold and silver are cumbersome to carry around when large transactions are to be made. The main purpose of paper money is to minimize this inconvenience. ● The government issued paper money to represent certain quantities of gold or silver those were kept by the government. ● The paper was accepted as a medium of exchange because persons accepting it knew that they could get precious metal when and if they wanted it. Such paper money backed up by gold or silver, or representative paper money, circulated freely. ● The general acceptance of paper money as medium of exchange without the intention of redeeming the precious metal it represented made possible by issuance of paper money with no such backing. ● In early times, Philippine peso bills used to bear the promise of the Philippine Treasury to redeem such notes in gold or silver to bearer on demand. To date, money circulating is liabilities of the Bangko Sentral ng Pilipinas and are guaranteed by the government of the Philippines.

● In 1949, the Central Bank was established and it replaced gold and silver coins with coins made of metal alloys that were less than one centavo in value. ● Today, coins circulating in the world are of lower metal value to prevent the waste or loss or previous metals and to facilitate the settlement of small obligations.

- made of metal like gold. They are also known as full-bodied money under the gold standard. - A full-bodied monetary system is one in which the value of the commodity circulating as money or metal coins is the same for non-monetary and monetary purposes.

- Coins whose face value is greater than material used. It is also similar to representative full-bodied money. - These are evidences (usually paper money) of ownership of a commodity such as gold and silver. - Originally, these paper notes were issued as simple iou’s or receipts acknowledging claim to an equivalent volume of gold or silver coins collectible on demand by the bearer of the note. Since these notes could be exchanged for a fixed quantity of metail coins on demand, they became acceptable as means of payment.

_______ excludes representative full-bodied money. It includes any form of money which exhibits a value in exchange greater than the intrinsic value of the material from which it was made.

________includes token coins, the centavos, pennies, and dimes initially issues at a face value substantially in excess of the market value of the metals in the coins.

• A monetary value created as the result of some future obligation or claim. • There are many forms of credit money, such as IOUs, bonds, and money markets.

the process of manufacturing coins for use as money.

The manufacture of money is done in a ____, and the process is called _________________.

Purity of the precious metal in a coin is known as ______, while _____ is the heaviness or bulkiness of the precious metal.

The ratio of the weight of pure metal to total weight of a coin is called “_______” and is expressed as a decimal, tenths or carats.

the difference between the cost of producing and distributing currency and any revenues earned through the distribution (Burton & Brown, 2015).

In coinage, ________ fees are charges by the government for coins whose face value is not more than the expenses for coins marked at a value higher than actual cost of minting and metallic content. This is done to realize profit for the government and to eliminate the practice of melting coins to get precious metals for purposes other than as a medium of exchange.

The government defines sizes, shapes, weights, and designs of coins but allows individuals to bring their precious metals to the mint to convert such into standard coins. Owners of these metals are charged with brassage or seigniorage fees.

Total responsibility for minting is borne by the government.

Government purchases precious metal in an open market and mints them as a medium of exchange at face value higher than its material content to facilitate trade.

Money according to Materials Used This can be metallic in nature. It is used for purposes other than as a medium of exchange. Precious metals like gold and silver are used as commodity money.

Money according to Materials Used High-quality paper materials are used to withstand wear and tear over a long period of time and to minimize counterfeiting.

Money according to Materials Used These are checks or other paper notes issued by financial intermediaries.

Money according to the Character of the Issuer These were issued by the National Treasury before 1949. They are notes and coins of various denominations.

Money according to the Character of the Issuer These were issued by the Central Bank after 1949. They are the Central Banknotes and coins circulating in the Philippines.

Money according to the Character of the Issuer These are issued by the Philippine National bank and other commercial banks as promises to pay, legal tender, payable on demand at a future time to the bearer or order.

Money according to Popularity It has no commodity value.

Money according to Popularity They are inconvertible paper money with no reserve. Face value is higher than the value of paper used.

Money according to Popularity They are representative full-bodied money made of base metals to settle small transactions. These are not advisable for use in big transactions and have limited legal tender power.

Money according to Face Value This is full-bodied money, authorized by law and having the weight, fineness, denominations, and designs prescribed by the government as a standard basis for coinage.

Any kind of money which, according to law, must be generally accepted when offered as payment for any obligation expressed in terms of the country’s monetary unit.

Money in the form of paper or coins, issued by a government and accepted at face value.