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1. Fixing a rate of exchange
2. Finding someone to swap with Double coincidence of wants must exists. 3. Trying to save
Money overcomes problems of barter by performing the following functions. 1. Money is a medium of exchange Generally acceptable in exchange for all other goods Double coincidence of wants not needed.
2. Money is a measure of value Avoids problems of fixing prices of goods and services in terms of all other goods and services.
3. Money is a store of value Commodities use up too much space or lose value. Money usually a good store of value. People can save. BUT… continual rise in prices (inflation) money loses value.
4. Money is a means of deferred payment Can buy on credit Credit in a barter system? – Would item still be fresh? – Would they be of the same quality?
1. Acceptability Must be generally acceptable. 2. Durability Must be hard-wearing. 3. Portability Easy to carry.
4. Divisibility Must be possible to divide money of a large value into smaller values without it losing value. 5. Scarcity Scarcity = value
Self sufficiencySpecialisationSurplusTrade
Watch this video: The Bartering Song!!! (WARNING – this song can be addictive!) Nk
Watch this video… An amazing series of double coincidence of needs… vw
Watch this video… s
Stage 1 Goods (shells, beads etc) used as money PROBLEMS: PROBLEMS: NOT divisible, portable, durable or scarce. Stage 2 Precious metals (gold, silver) – due to scarcity. PROBLEMS: PROBLEMS: NOT easily divisible, portable.
Stage 3 Coinage PROBLEMS: PROBLEMS: clipping, greedy kings!
Stage 4 Paper money Paper receipts from Goldsmiths for deposits of precious metals.