.

e y
o n
M BY SYLVIA.K AND HARSHITHA.B
Y10S
 WHAT IS MONEY?
Money is anything that is widely accepted or used to exchange for goods.
Today when we think about money we are typically referring to notes and coins. However,
households and businesses also se many other ways of making payments e.g. credit cards
and debit cards.
Money is generally acceptable medium of exchange.

The Chinese Yuan

The American Dollars
 HISTORY OF MONEY
Before money, you would either have had to accept other goods or services as payment or be self-
sufficient by producing everything all the things you needed or wanted for yourself.
Many of our ancestors had to be self-sufficient. All the individuals or small communities would
produce all the things the needed or wanted for themselves, e.g. growing or hunting their own food
supplies, building their own shelters e.t.c.

Then came barter:

 Before money was used, people would barter- that is, exchange goods, say a goat for several
chickens. This requires 2 people who make the trade to want what the other has to offer(a double
coincidence of wants)

That picture of Og demonstrates specialization- the first step towards a wealthier society. With
specialization people needed to trade and exchange. And this is called barter.

For example:
If a farmer had some spare corn and needed an axe he or she would travel to the market to find
someone who was willing and able to exchange an axe for the corn.
But then came the inconveniences:

Fixing a rate of exchange:

But how much corn would be needed to exchange for the axe?
In a barter system the value of each and every good must be expressed in terms of every other good
to have a fair exchange and this can lead to a lot of inconvenience to the traders.

Finding someone to swap with:

What if the axe maker wanted apples in return rather than the corn?
In this case an economist would say that no double coincidence of wants exists. In other words,
before two people can barter the must both want the good that the other person has.
Trying to save:
Perhaps the farmer could travel to other markets to find an axe maker who wanted corn in exchange,
but he would have to get there quickly as the corn could go bad.
Even a carpenter could store his tables and chairs but would need a large room, or even saving meat
and cheese without the help of a refrigerator!!

Barter, thus became a very inefficient way of trade. This is why people had to make most of their
basic goods and services the needed for themselves and go without many others. Clearly it would be
much easier if there was a single commodity or good that everyone was willing to accept in
exchange for these goods or services.

The development of money

There have been five main stages to the development of money and the have shown the process of
trial and error that man has gone through trying to discover the characteristics of money.

Spade
money(china) Cowrie shells.
Was an early These have been the
form of coin most widely and
used during the longest used
Zhou dynasty of currency in history.
China (1045 to
256 BC).
 Kissi pennies: Shoe
was an iron money(china)
currency made These were
in Sierra Leone first used as a
that circulated medium for
widely through exchange as
Liberia and early as the
Sierra Leone Qin Dynasty
Stage1: and Guinea- (3rd century
The earliest form of trade was goods. Conakry.
Knives, bread, shoes, BC)
cattle were among the things that were
used to trade but soon this method was abandoned due to not having the qualities of money e.g.:
divisibility, portability etc..

Stage 2:
Precious metals such as gold and silver, have always been scarce enough to make them a possible
money. However, trading with metals involved carrying around a weighing scale and tools to cut the
materials which soon became uncomfortable.

Stage 3:
The problem of portability of the metals led to coinage. Precious metals in predetermined weights were
often stamped with face of the king or the queen, and with another stamp to show their value.
The problems of this coinage was:
`The clipping of the coins, meaning chipping away some of the precious metal of the coins making
it less worth
Stage 4:
The paper money. This was issued by early goldsmiths who accepted deposits of precious metals for
keeping in their safes. In return, they issued a paper receipt to the owner. It was quickly realized that it
was easier that these paper claims were easier to exchange goods with that gold.

Stage 5:
Goldsmiths receipts for deposits of precious metals were to become the first paper money, and
goldsmiths the first banks

CHARACTERISTICS OF MONEY
1. Acceptability:
Anything can be used as money as long as it is generally acceptablethis is why a worthless piece of
paper can be used as paper, for example a 10 dollar or 50 euro note.

2. scarcity:
A good money must be limited in supply if people and firms are to value it. For example stones and
pebbles would not be good money as people could simply pick up as many as the liked from anywhere.

3. Divisibility:
It must be possible to divide money of a larger value into smaller values to make small purchases or to
give change, without it losing value. This is why we have notes and coins with different face values to
buy goods and services with different prices to give change.
4. Portability:
Money should be easy to carry around. E.g: how the metals were too uncomfortabkle to carry
around. Paper notes are lightweight and can be folded into a wallet or a purse, while a
handful of small metal coins can be carried easily in your pockets.

5. Durability:
Any good used as money must be hard-wearing(e.g: the metals and cowrie shells)
Money would be useless if it just melted away in your pockets. Coins and notes must be
strong and durable so that they may act as a store of value.

FUNCTIONS OF MONEY
1. A medium of exchange:
Money is generally accepted as a means of payment for most goods. This is the main
function of money anyway.
2. Money is a unit of account:
The price of an item ca be measured in terms of how many units of the currency it is worth.
For instance, a low quality television may cost $200 yet a high-quality television may cost
over $500

3. Money is a store of value:

You can save money because it keeps its value. Saving enables use of money in the fuure.
This could have been impossible with barter trade though!!

4. Money is a standard for deferred payments:

Borrowers are able to borrow money and pay it back at a future date. Something like this
sounds very unlikely and chaotic to take place in a barter trade system!

Money as a store of
value
 A FEW FUN FACTS FOR YOU
A.D. 800 - 900: THE NOSE More Monopoly money is
The phrase "To pay through the nose" comes from
printed annually than real
Danes in Ireland, who slit the noses of those who were
remiss in paying the Danish poll tax. money.

There are more credit cards than people in the U.S

Currency paper is composed of 25 percent linen and 75 percent

cotton. Red and blue synthetic fibers of various lengths are
distributed evenly throughout the paper. Before World War I these
fibers were made of silk.

The first woman to appear on U.S. coins wasn't even American she was a
Spanish queen. Featured on a commemorative coin, Queen Isabella of
Spain was the first lady to be cast on a U.S. coin in 1893..
Thank you for
listening!!