Dr. Rita Littrell
Bessie B. Moore Center
for Economic Education
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Cows
Tobacco
Cowry shells
Salt
Gold
Furs
Cigarettes
Oxen
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Spices
Nutmeg
Wampum
Ancient coins
Woven goods
Tea
Yap stones
They realized that they
could consume more
goods if they traded.
• Production of fewer types of goods and
services than we consume
• Leads to interdependence
• We depend on others to produce many
of the things we consume
Markets were born.
Markets
• Places where people exchange goods and
services
• People trade to consume greater variety of
goods and services
Markets became larger
and production became
more specialized.
People traded preserved fish, woven fabrics,
baskets, game, furs – anything of which they
could
produce extra through
specialization. Direct
trade of goods is called
barter.
Barter
• The direct exchange of
goods and services
• Must have double coincidence of wants
• Results in time costs
• Resulted in need for a medium of
exchange
It might take a lot of time to find
someone who has a blanket to accept
your chicken in payment for the blanket.
This is called double-coincidence of wants. You
might need to trade with others to get something the
weaver wants in order to get your blanket.
People began to use items as a
medium of exchange.
For example, the
weaver might sell her
rug for salt. The salt is a commodity that is desired
by all. It can be used to preserve food or it can be
used to buy another good ----as a medium of
exchange.
Throughout history many
things were used as a
medium of exchange.
Eventually, they realized that coins worked well for
this function. They were valued because of the
metal that could be used for other purposes. They
could be melted down and changed as rulers
changed. They could be saved for later use. This
was the first function of money.
Which country used paper money
first?
Why?
Coins were good because they could
be saved and used later. This allowed
people to save.
Our economic
and financial
system is
developing.
But, what works
better as a medium of exchange and
store of value than coins?
Commodity money has
intrinsic value of its own.
Fiat money is backed by
government. The money
has no value on its own.
Which is gold?
Does the US use commodity or fiat money today?
A third function of money is that it can
be used like a measuring stick. It helps
you to compare the price of two goods.
The three functions of money are:
of exchange
of value
of value
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Portable
Divisible
Durable
Uniform
Scarce
What is
wrong with each of
these items that
have historically
been used
as money?
In summary, characteristics of
money should include:
Portable
Divisible
Durable
Uniform
Scarce
US Money Today
• Banks
• Savings and loans
• Benefits of saving money in
financial institution
What can you do with Money?
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Earn it
Save it
Spend it
Invest it
PowerPoint design created by Amy Moore
Bessie B. Moore Center for Economic Education