1. The Evolution of Money

2. Before money
Barter system : relies on a “mutual coincidence of wants;” works only on a small scale

3. Functions of money
Medium of exchange : something accepted by all parties as payment for goods and services
Example in history :
Roman soldiers paid in salt (salarium)

4. Functions of money,cont’d
Measure of value: a common denominator to express worth (AKA “standard of value” or “unit of account.”)
Example : our dollars and cents on a price tag

5. Functions of money,cont’d
Store of value : allows purchasing power to be saved until it is needed
Example : goods and services converted to money and vice versa

6. Early money
Commodity money : money in the form of an economic good; has another use
Examples : bricks of tea, corn, tobacco, gunpowder, cigs in prison

7. Early money, cont’d Fiat money : money by decree, has no other purpose
Examples : coins, wampum

8. The American Dollar
Colonial times : colonists used European coins; British shilling, Austrian taler, and Spanish peso (most common)
The peso and taler looked similar,so they were both called “talers” and eventually
“dollars.”

9. The dollar as monetary system
Ben Franklin and Alexander Hamilton*
decided to base the dollar on a system of tenths, rather than eighths (like the peso).
*These are the only 2 Americans on currently printed bills that were not presidents

10. Characteristics of money
Portability : easy to carry
Uniformity: each denomination represents a standard value
Acceptability: legal tender
Durability : must be relatively long-lasting
Divisibility : must be able to be broken down into smaller units
Limited in availability/stability : must be relatively scarce, or it loses its value