Intro to Money and Banking

Bartering Before the existence of money, people used bartering to acquire goods they could not provide for themselves Bartering is exchange of goods/services without using “money” Even with the existence of money, some companies still take advantage of bartering today E.g. bottled-water company exchanges water in a marathon in exchange for advertising and promotion

Barter Activity Objective: Secure the animals you need in the right quantity Rules: Carefully record all transactions You may not use violence to force a trade Buy low, sell high You can trade for more than what you need, then use the extras to trade for something else You can trade with 1 person or several people to fill one animal need Do not trade fractional units You have 20 minutes If you have a question during the activity, just ask

Barter Activity How many of you met all 6 needs? What about 5 needs? 4 needs? What are the problems with bartering? It’s hard to know the value of goods without using monetary currency. Some animals are in surplus and some animals are scarce. These affect the trade value or the relative price of one animal compared to another. If you trade animals one for one with them having different values, one person is going to be the loser and the other who trade away animals that are worth less the winner

Easy to get Hard to find Equilibrium

Functions of Money Four Main Functions of Money: A medium of exchange Measurement of Value Store of Value Standard of Deferred Payment

A Medium of Exchange Money allows you to obtain goods and services without having to barter for them Money should be easily carried, durable, hard to counterfeit

Measurement of Value Money is the basis most societies use to determine the value of goods and services With money, the value of all goods and services is measured in a term common to all things: price Money makes it easier to compare of one item against another

Store of Value People may want to save money for the future (emergency, vacation) In the days of bartering, perishable items had to be traded immediately

Standard of Deferred Payment People must be able to borrow money and give it back at a later date, with the added charge of interest

Bartering Success Story https://www.youtube.com/watch?v=8s3bdVxuFBs

Bank of Canada “Bank of banks” Established by the federal government in 1934, it is Canada’s central bank Most important function of the bank is to control the money supply, that is the total amount of money in circulation The bank also issues our paper money in circulation, destroys old currency.

Legal Tender Legal tender, as defined by the Government of Canada, must be accepted as valid payments The two main forms of legal tender are coins and paper money Coins are minted at the royal Canadian Mint in Ottawa, the head office, and in Winnipeg. As discussed earlier, paper money (also known as bank notes) is issued by the Bank of Canada Although Widely used and accepted as payments, cheques are NOT legal tender (they can be refused.