The Evolution of MoneyThe Evolution of Money

1. Some examples of money before there was money?Problems with barterThe birth of money

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Examples of money before there Examples of money before there was money…was money…

cattleTobacco, corn, saltGold, silver, copperWhale blubber, whale teethWampum, elephant hairSaffron, ginger

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BarterBarterLESSON 16.1

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BarterBarterLESSON 16.1

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BarterBarter

2. Moneyless economy that relies on trade3. Was the “original” money

Problems with bartering?4. Payments not always acceptable5. Difficulty of assessing “values”6. “coincidence of wants” – finding someone who actually values what you have to trade

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Three Functions of MoneyThree Functions of Money

7. #1) Medium of exchange8. #2) Unit of account9. #3) Store of value

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#1) Medium of Exchange#1) Medium of Exchange

10. Accepted by all parties as payment for goods and services

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Commodity MoneyCommodity Money

11. Money that has an alternative use as an economic good. I guess you could always eat that cow….12. Examples could be tea leaves, salt, that infamous whale blubber, jewelry, gold, tobacco, and cotton

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Commodity Money cont..Commodity Money cont..

13. Limitations of commodity money◦Durable◦Portable◦Divisible

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Fiat MoneyFiat Money

14. Without the government saying it is, paper money would be essentially “paper money” or worthless15. This is why all currency says “legal tender”

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#2) Unit of Account#2) Unit of Account

16. Money should also measure the value of goods by assigning them a “price tag”17. Something of more value will simply cost more units of money18. A dollar is always worth a dollar

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#3) Store of Value#3) Store of Value

19. Money keeps its value if stored in a bank20. Money will always have a worth – even if it sits in a bank21. A cow might not keep its value, let’s say if it DIES!!

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The Characteristics of MoneyThe Characteristics of Money

DurabilityPortableDivisibleUniformityLimited in Availability (Supply)Acceptability

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DurabilityDurability

22. Obviously must last a long time and withstand wear and tear23. Dollar is made of 75% cotton and 25% linen24. Average coin lasts 20 years in circulation25. Average dollar bill last around 2 years

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PortabilityPortability

26. Money should be easily transferred from one person to another27. I guess carrying that cow wouldn’t be too portableMuch research has been done to make the dollar and coins “fit” with convenience in our hands

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DivisibilityDivisibility

28. Money should be easily dividable in units.29. This gives us “change”, and allows us to budget by not taking all our money with us when we go out

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UniformityUniformity

30. Money is always assigned a value to what specifically it can buy31. For example, I go and want to trade my cow for something else. Is it a big cow? A healthy cow? How would this be determined with efficiency?32. An old crumply, faded $100 bill with nasty drawings on it is just as good as a freshly printed $100 bill.

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Limited AvailabilityLimited Availability

34. If too much would be printed, we would have inflation35. What would happen to “prices” or the “value of the cow” in the event of Mad Cow disease?36. Silver was once accepted as a form of money. What would decrease the value of silver or cause inflation?

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Money TriviaMoney Trivia

What is the largest possible amount of money in U.S. coins without being able to make change for a dollar.

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Answer to Money TriviaAnswer to Money Trivia

If you have three quarters, four dimes, and four pennies in your possession, you have the largest possible amount of money in U.S. coins without being able to make change for a dollar.This would be equal to $1.19

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Money TriviaMoney Trivia

I have two coins that equal thirty cents and one of them is not a quarter. What are they?

LESSON 16.1

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Money Trivia AnswerMoney Trivia Answer

A quarter and a nickel.ONE of them is not a quarter, the other

one is.

LESSON 16.1

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