Ritz G9 Econ: Money - an introduction

Ritz G9 Econ: Money - an introduction

What is money?

It can be anything people want it to be--literally.

It is easy to think of money as dollar bills and quarters, but money is anything that a majority of people can agree on as a means of exchange.

If enough people in one town are willing to accept donuts as money, then donuts are money--at least for the people in that town. They might run into trouble when they try to spend those donuts in other towns, however.

Barter

Before coins or paper money, people exchanged (traded) fish for stone tools or leather goods for wood. This method of exchanging one thing for something else is called barter.

It is still in use today: Sue might agree to fix Ramon's electrical wiring if Ramon agrees to figure Sue's income tax. They've exchanged services, not goods, but they've still bartered.

The difference between barter and money is the situation.

Money can be used in most situations.

In a barter, each individual must have something to exchange that the other individual needs or wants.

Sue and Ramon can agree to swap electrical work for accounting, but Harold, another accountant, might insist on being paid in dollars and cents. Harold may not need any electrical work done, and he can spend dollars anywhere.

Money Throughout History

Money in coin form has been around since about 600 B.C. (The Spring and Autumn Period of the Zhou Dynasty)

When the Greek and Roman civilizations--the dominant economies and civilizations of the times-- began accepting coins as money, most of the rest of the world went along.

Coins are still accepted today but usually as percentages of paper money. (A quarter is one quarter of a dollar, etc.)

The first paper money was issued in China in the 13th century.

The concept didn't catch on in the West until about 400 years later.

The paper dollar appeared in the United States after the Revolutionary War and slowly became the national standard of value

Most of the common forms of money today

Most of the common forms of money today--including checks, money orders, stock certificates, and government bonds, just to name a few--are based on the dollar.

Going back to our definition, we can say that the dollar is money because a majority of people in the country (and even the world) accept it as a means of exchange. In historical terms, the dollar is a new form of money, yet it is accepted almost everywhere in the world.

Poll

Check each that applies:

What are the three uses of money?

• A medium of exchange

• A unit of account

• A unit of value

• A unit of grading

Open Ended

In your own words, why does money make exchanges easy?

Open Ended

In your own words, why does money allow us to easily determine and compare, the value of some good or service?

Open Ended

In your own words, why should money keep its value over time?

Multiple Select

Which requirements are necessary for money to be widely acceptable?

• It must be portable

• It must be durable

• It must be divisible

• It must be in limited supply