The Evolution of Money 1. Some examples of money before there was money? Problems with barter The birth of money S1S1

Examples of money before there was money… cattle Tobacco, corn, salt Gold, silver, copper Whale blubber, whale teeth Wampum, elephant hair Saffron, ginger SLI DE 2

Barter LESSON 16.1 SLI DE 3

Barter LESSON 16.1 SLI DE 4

Barter 2. Moneyless economy that relies on trade 3. Was the “original” money Problems with bartering? 4. Payments not always acceptable 5. Difficulty of assessing “values” 6. “coincidence of wants” – finding someone who actually values what you have to trade SLI DE 5

Three Functions of Money 7. #1) Medium of exchange 8. #2) Unit of account 9. #3) Store of value SLI DE 6

#1) Medium of Exchange 10. Accepted by all parties as payment for goods and services SLI DE 7

Commodity Money 11. Money that has an alternative use as an economic good. I guess you could always eat that cow…. 12. Examples could be tea leaves, salt, that infamous whale blubber, jewelry, gold, tobacco, and cotton SLI DE 8

Commodity Money cont Limitations of commodity money ◦Durable ◦Portable ◦Divisible SLI DE 9

Fiat Money 14. Without the government saying it is, paper money would be essentially “paper money” or worthless 15. This is why all currency says “legal tender” SLI DE 10

#2) Unit of Account 16. Money should also measure the value of goods by assigning them a “price tag” 17. Something of more value will simply cost more units of money 18. A dollar is always worth a dollar SLI DE 11

#3) Store of Value 19. Money keeps its value if stored in a bank 20. Money will always have a worth – even if it sits in a bank 21. A cow might not keep its value, let’s say if it DIES!! SLI DE 12

The Characteristics of Money Durability Portable Divisible Uniformity Limited in Availability (Supply) Acceptability SLI DE 13

Durability 22. Obviously must last a long time and withstand wear and tear 23. Dollar is made of 75% cotton and 25% linen 24. Average coin lasts 20 years in circulation 25. Average dollar bill last around 2 years SLI DE 14

Portability 26. Money should be easily transferred from one person to another 27. I guess carrying that cow wouldn’t be too portable Much research has been done to make the dollar and coins “fit” with convenience in our hands SLI DE 15

Divisibility 28. Money should be easily dividable in units. 29. This gives us “change”, and allows us to budget by not taking all our money with us when we go out SLI DE 16

Uniformity 30. Money is always assigned a value to what specifically it can buy 31. For example, I go and want to trade my cow for something else. Is it a big cow? A healthy cow? How would this be determined with efficiency? 32. An old crumply, faded $100 bill with nasty drawings on it is just as good as a freshly printed $100 bill. SLI DE 17

Limited Availability 34. If too much would be printed, we would have inflation 35. What would happen to “prices” or the “value of the cow” in the event of Mad Cow disease? 36. Silver was once accepted as a form of money. What would decrease the value of silver or cause inflation? SLI DE 18

Money Trivia What is the largest possible amount of money in U.S. coins without being able to make change for a dollar. SLI DE 19

Answer to Money Trivia If you have three quarters, four dimes, and four pennies in your possession, you have the largest possible amount of money in U.S. coins without being able to make change for a dollar. This would be equal to $1.19 SLI DE 20

Money Trivia I have two coins that equal thirty cents and one of them is not a quarter. What are they? LESSON 16.1 SLI DE 21

Money Trivia Answer A quarter and a nickel. ONE of them is not a quarter, the other one is. LESSON 16.1 SLI DE 22