With a partner, discuss: what is the
function (use) of each of the items
• Salt is one of the world's oldest forms of payment. In fact, the word
salary derives from the Latin "salarium," which was the money paid
to Roman soldiers to buy salt. It was the main form of currency in
the Sahara Desert during the Middle Ages, and was used
extensively throughout East Africa. Typically, one would lick a salt
block to make sure it was real and break off pieces to make change.
Doty's block, seen here, is 1,500 years old.
Other incredible, edible currencies include "reng," a yarn-ball of
tumeric spice wrapped in coconut fibers that is used for trade in the
Solomon Islands; cacao (or chocolate beans), widely used
throughout Mexico and Central America; and Parmigiano Reggiano
cheese, so highly regarded that it was used both as currency and
bank collateral in Italy.
One particularly inedible currency: the poisonous money seeds of
Burma. Which if nothing else proves that money does indeed grow
on trees — or at least bushes.
Think about it…
• Are credit cards money?
• Are debit cards money?
• Are seashells money?
• Is sand money?
A history of money
What is money?
What are money’s three functions?
Can you trade without money?
How are credit and money different?
What are the two major types of money?
What is money?
Money is anything Exchange (trade) can
people accept as happen without
payment for goods money.
– Can be used to pay Barter—direct
exchange of one
Money has three another
functions: – Waste of time in
– Medium of exchange transaction
– Unit of account
– Store of value
Medium of Exchange
• Removes problem of A medium of exchange
barter, because is anything widely
everyone is willing to accepted in exchange
accept it as payment for goods and services
• Increases trade by • This is called being
providing a more fungible—
convenient way to interchangeable for a
exchange valued good/service
Unit of account
Unit of account—function of money that
provides a common measurement of value
• Allows us to compare the value of two
• Monetary units are what we call our
money (US/Australia—dollar; El
Store of value
Store of value—the function of money to
hold value over time
• This allows us to save our money and
spend it in the future
• Does not mean that the value will remain
Other properties of money
• Money must be scarce, but not too scarce
• Should be portable—easy to carry
• Should be divisible—able to “make
• Must be uniform—easy to tell how much it
is worth, look the same as other money of
What stands behind U.S. money?
• Commodity money—anything that serves as money,
has market value based on the material it’s made from
– In other words, has value as money AND as a good
– Should the penny be considered commodity money?
– Used to be backed by gold/silver
• Fiat money—money accepted by law, not because of its
– In other words, what the government says is acceptable for
– Dollar bills
– “THIS NOTE IS LEGAL TENDER…” means your paper money is