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TRANSCRIPT
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MONEY
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Why do we need money?
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Group Exercise
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What is Money?
Watch this video:
https://www.youtube.com/watch?v=AjTwcQYgISA
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3 main problems of bartering…
1. Fixing a rate of exchange
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2. Finding someone to swap withDouble coincidence of wants must exists.
3. Trying to save
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The functions of moneyMoney overcomes problems of barter by performing the following functions.
1. Money is a medium of exchange• Generally acceptable in exchange for all other
goods• Double coincidence of wants not needed.
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2. Money is a measure of value• Avoids problems of fixing prices of goods and
services in terms of all other goods and services.
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3. Money is a store of value• Commodities use up too much space or lose
value.
• Money usually a good store of value. People can save.
• BUT… continual rise in prices (inflation) money loses value.
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4. Money is a means of deferred payment• Can buy on credit
• Credit in a barter system?– Would item still be fresh? – Would they be of the same quality?
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The characteristics of good money
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1. AcceptabilityMust be generally acceptable.
2. Durability
Must be hard-wearing. 3. Portability
Easy to carry.
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4. DivisibilityMust be possible to divide money of a large value into smaller values without it losing value.
5. ScarcityScarcity = value
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So, why is money important?
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•Self sufficiency
•Specialisation
•Surplus
•Trade
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Watch this video:
The Bartering Song!!! (WARNING – this song can be addictive!)
https://www.youtube.com/watch?v=ZXIuFpu72Nk
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One Red Paper ClipWatch this video…
An amazing series of double coincidence of needs…
https://www.youtube.com/watch?v=BE8b02EdZvw
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A Brief History of Money
Watch this video…
https://www.youtube.com/watch?v=kJ8HEsoI39s
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Stage 1• Goods (shells, beads etc) used as money• PROBLEMS: NOT divisible, portable, durable
or scarce.
Stage 2• Precious metals (gold, silver) – due to scarcity.• PROBLEMS: NOT easily divisible, portable.
A Brief History of Money
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Stage 3• Coinage• PROBLEMS: clipping, greedy kings!
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Stage 4• Paper money• Paper receipts from Goldsmiths for deposits of
precious metals.
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