You know that a dollar bill is worth $1, but did you know that the value of that dollar actually changes? Money is valued by looking at what it will buy. If a dollar will buy you a candy bar today, but tomorrow you need two dollars to buy that same candy bar, then the value of the money has changed.
George Washington was paid $25,000 a year to be president. The current president earns about $400,000 a year. The job hasn't changed, but the value of the dollar has. Inflation is what happens when the prices of things go up. Inflation means money will buy less than it did before.
When inflation increases faster than the increase in people's salaries, it means people are able to buy less. Using the previous example, if you had $2 yesterday and could buy two $1 candy bars, but today the price has gone up and your $2 will only pay for one candy bar, you've just been hit with inflation!
The value of money used to be based on the actual value of the bushel of barley or precious metal in the coin you had in your hands. Today, we don't melt down our quarters, so the money we use has come to have a symbolic value.
Count On It: Paper Money Today
Today, all U.S. bills are printed by the Bureau of Engraving and Printing, which is part of the U.S. Treasury. In 1929, big changes were made in U.S. paper notes. The size was reduced by 25 percent to make the bills easier to handle and the design was standardized for all the denominations. Very few changes were made until 1994, when paper currency was redesigned to add anti-counterfeiting and other features. These newly designed bills are being added over a period of years. The first to be introduced was the $100 note in 1996. There are seven denominations of paper money currently being produced: $1, $2, $5, $10, $20, $50, and $100.
At one time there were also $500, $1,000, $5,000, and $10,000 bills, but these haven't been printed since 1946. The largest U.S. bill ever was the $100,000, and only 42,000 were produced, all in 1934. The $100,000 bill was never in general circulation. It was used only for Federal Reserve Bank transactions.
It's Raining Bills
Large amounts of new money are printed each year. Check out the number of bills that are created every year:
$1 bills: 4.5 billion
$5 bills: 800 million
$10 bills: 851 million
$20 bills: 889 million
$100 bills: 950 million
Not all denominations are printed every year. The $50 and $2 bills are only printed every few years.
The U.S Treasury is in charge of making sure that money in circulation is in good condition. Ever wonder what would happen if a bill you had got ripped or damaged? As long as you have at least half of the bill, you can take it to your bank and exchange it for another bill. The U.S. Treasury will exchange it for the bank. Every year the U.S. Treasury handles approximately 30,000 claims and exchanges mutilated currency valued at more than $30 million.
Damaged paper bills are shredded and recycled. The U.S. Treasury shreds and recycles 715 million bills each year. Can you imagine having a job where you destroy money every day?
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