1. Money, Banking and the Markets Lesson 1 Money and Bartering

2. About Money Aim:  How does the existence of money make our lives easier? Do Now:  Explain what gives a $100 bill more value than a $20 bill. After all, they’re the same size and cost the same to produce.

3. About Money  Do Now answers: 1.Money is a store of value. They both store value, but the $100 bill stores much more. 2.Money is a medium of exchange. We buy a wide variety of goods and services with it. 3.It is legal tender to pay bills and loans It can’t be refused when we offer it!

4. What if There Were No Money?  Goods and services would have to be exchanged directly!  What is happening in the photo to the right?  Grains are being exchanged for apples What is this direct exchange called?  Barter.

5. What if There Were No Money?  What are the disadvantages of bartering?  Scenario: Marcy wants a small amount of fruit from the farmer’s stand. The farmer needs a new engine for his tractor. 1.It doesn’t work well if the values of the goods and services to be bartered are not similar  Scenario: Eduardo, a home remodeler, has been looking all over to find someone to trade him a car for an updated bathroom. 2.Finding the right partner is very inefficient!

6. What if There Were No Money?  What are the advantages of bartering?  Scenario: Toyota buys steel from US Steel Corp, owing U.S. dollars. When it goes to pay, it sees the Yen has dropped in value against the dollar, making the purchase more expensive. 1.It avoids currency exchange issues  Scenario: A country suffers hyperinflation, with prices on goods being raised several times per day by frightened store owners. 2.It functions when there is no stable currency.

7. Lesson Summary 1.What three uses does money have? 2.How would we acquire the goods and services we need if money didn’t exist? 3.Identify one advantage and one disadvantage of bartering. 4.In what ways does money make our lives easier?

8. Web Challenge #1 Q: We all agree that money is a store of value. Why might we be disappointed if we use it to store value over long periods of time? A: The prices of the goods and services we buy keep going up! Challenge: Find out the rate of growth of prices of basic goods / services, like food, clothing, housing, energy and education over the last few decades

9. Web Challenge #2 Q: Why are governments hostile to their citizens and corporations that may want to barter? A: The transactions may be difficult to trace and value, meaning governments will not collect associated sales and income taxes from either party! Challenge: Research the size of the barter market, online platforms that facilitate bartering, and the most common goods and services bartered

10. Web Challenge #3 Q: When the Federal Reserve Bank prints and feeds money into the economy, this may undermine the value of our money. What else can we own that will be a store of value? A: Supposedly, any investment priced in dollars (and whose rate of return isn’t fixed like a bond), such as real estate, commodities, and even stocks.

11. Challenge #3 (cont.) Q: When the Federal Reserve Bank prints and feeds money into the economy, this may undermine the value of our money. What else can we own that will be a store of value? Challenge: Using search phrase “inflation hedge”, find out what professional investors who fear inflation are currently investing in, and why

12. What is the medium for transaction in the following? a. Barter? b. Money? a. Barter? b. Money?