Origins of Money, Value and Functions Chapter 10 - Section 1

Video – Art of the Swap https://youtu.be/JWxcCCVJ1aU

Activity: Barter Economy Activity 1) You will be assigned a specific good (fish, strawberry, apple, loaf of bread, spoon) (paper cutout) 2) You will receive a card that indicates which items they want to obtain in a specific order.. For each item that they get, they should have the person who they received the item from initial their card. (ex: Student A’s card may read: Fish, apple, bread, spoon, fish, apple) - this student would have to first get a fish, then an apple, then bread, etc… If the student got the first item, which was a fish, from Andy Highstrom, they would have Andy’s initials, AH, next to the first item on their list, the fish... 3) Students will have 5 minutes to see how many transactions they can complete (ex: using the example from above, Student A would see how far into their sequence of listed items they would be able to get)

Activity: Barter Economy Activity What did you find frustrating about this activity? Were there any strategies that you used to help you get the items that you wanted? You just participated in a simulation that is very similar to how a barter economy functions….. How would you describe a barter economy Would you prefer to live in an economy that uses money or the bartering system? Why?

1. Barter Economy Definition Barter: an economy in which trades are made in goods and services instead of in money.

2. Problems with a barter economy barter: trading one good/service for another without using money Barter requires a “double coincidence of wants”. To trade, you have to find someone who has something you want and who wants to trade what you have

2. What are other problems with a barter economy? (cont) Another way to think about this is that they have high transaction costs Transaction costs - the extra time and effort taken before the purchase can be made. Its time consuming. Its not convenient. It leads to self sufficiency.

3. Money Definition A good that is widely accepted for purposes of exchange and in the repayment of debt

4. Examples and problems with old items used as money (choose 2) Cows Sacks of grain Shells Beads Gold coins Chisels Fish

5. What gives money its value? General acceptability People accept it and you know you can use it to get what you want Ex. Euro dollar transition Watch Ted-Ed Video – What gives a dollar bill its value?

6. Why is paper money useful? People believe it has value It makes exchange easier

6. Why are checks considered money and credit cards are not? Credit cards are not considered money. When you are paying with a credit card you are making a promise to pay for something. You haven’t actually paid for it. Checks and debit cards are considered the same as money. They are taken from an account of money in a bank.

7. What purposes/functions must money service?

7. What purposes/functions must money service? Medium of exchange: - Anything generally accepted in exchange for goods and services - This means that money must be acceptable to people who want to sell things. Early money: shells, coins, beads, cattle, fish, sacks of grain

7. What purposes/functions must money service? B. Unit of Account - Common measurement in which values are expressed - That means you know how much its worth. It needs to be divisible, portable and interchangeable. It is hard make change with a cow (its not divisible), carry it around in your pocket (its not portable) or to know if this cow is the exact same value as that cow (interchangeable)

7. What purposes/functions must money service? C. Store of Value - Maintain value over time - You should be able to save money for the future. Some of the early types of money lost value.

7. What purposes/functions must money service?

What is a division of labor? It means don’t all try to produce everything we need. It is more efficient because you become more skilled and therefore more productive. You develop an economy of scale which uses technology to produce even more.