History, Functions, and Characteristics of Money

I need my lawn cut…would you be willing to mow my lawn for…

Remember…Trade has to be voluntary. If you don’t benefit, you will not trade. If you won’t trade for the paper, what would you be willing to trade for?

What is money? Money is anything that is widely accepted as a form of payment for a good Solution to the problems associated with bartering Bartering: trading for g/s without the use of $ Why is Bartering Inefficient? Goods and services must be immediately available Both traders must agree on the value of the exchanged goods

Uses/Functions of Money Facilitates transactions between buyers and sellers Medium of exchange Can be traded broadly for g/s in an economy

Standard of Value/ Unit of Account Prices of other items can be compared to it

Store of Value Can buy goods now or in the future.

Why is this better than Characteristics of Money… Durable (Long lasting 75% Cotton 25% Linen) Portable (can easily carry it around) Divisible (Able to be divided into smaller parts) Uniform (Same type or denomination. You can tell that $1 is $1 or $100 is $100) Scarce (not readily available) Acceptable (Form of payment approved by all or most. Consumers must have confidence in its ability to be exchanged)