Money Dr. Rita Littrell Bessie B. Moore Center for Economic Education
Dr. Rita Littrell Bessie B. Moore Center for Economic Education.
Dec 16, 2015
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Money
Dr. Rita LittrellBessie B. Moore Center
for Economic Education
What do these items have in common?
• Cows• Tobacco• Cowry shells• Salt• Gold• Furs• Cigarettes• Oxen
• Spices• Nutmeg• Wampum• Ancient coins• Woven goods• Tea• Yap stones
THEY HAVE ALL BEEN
USED AS MONEY AT
SOME TIME IN HISTORY
BY SOME CULTURE!
Early humans specialized in
production: farming, hunting, fishing.
They realized that they could consume more goods if they traded.
Specialization• Production of fewer types of goods and
services than we consume• Leads to interdependence• We depend on others to produce many
of the things we consume
Markets were born.
Markets
• Places where people exchange goods and services
• People trade to consume greater variety of goods and services
Markets became larger and production became more specialized.People traded preserved fish, woven fabrics, baskets, game, furs – anything of which they could produce extra through specialization. Direct trade of goods is called barter.
Barter
• The direct exchange of goods and services
• Must have double coincidence of wants• Results in time costs• Resulted in need for a medium of
exchange
Finally, as more goods were
available, barter became difficult.
It might take a lot of time to find someone who has a blanket to accept
your chicken in payment for the blanket. This is called double-coincidence of wants. You might need to trade with others to get something the weaver wants in order to get your blanket.
People began to use items as a medium of exchange.
For example, the weaver might sell her rug for salt. The salt is a commodity that is desired by all. It can be used to preserve food or it can be used to buy another good ----as a medium of exchange.
Throughout history many things were used as a medium of exchange.Eventually, they realized that coins worked well for this function. They were valued because of the metal that could be used for other purposes. They could be melted down and changed as rulers changed. They could be saved for later use. This was the first function of money.
Paper currency of course!
Which country used paper money first?
Why?
Store of value – function 2!
Coins were good because they could be saved and used later. This allowed people to save. Our economic and financial system is developing. But, what works better as a medium of exchange and store of value than coins?
Commodity or Fiat
Commodity money has intrinsic value of its own. Fiat money is backed by government. The money has no value on its own.
Which is gold?
Does the US use commodity or fiat money today?
Measure of ValueA third function of money is that it can
be used like a measuring stick. It helps you to compare the price of two goods.
In summary!
The three functions of money are:•Medium of exchange•Store of value•Measure of value
Characteristics of Money
• Portable• Divisible• Durable• Uniform• Scarce
What is wrong with each
of these items that have historically
been used as money?
What is wrong with these?
In summary, characteristics of money should include:
Portable
Divisible
Durable
Uniform
Scarce
US Money Today
Money Today – Around the Globe
Financial Institutions
• Banks• Savings and loans• Benefits of saving money in
financial institution
What can you do with Money?
• Earn it• Save it• Spend it• Invest it
PowerPoint design created by Amy MooreBessie B. Moore Center for Economic Education
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