The Big Question: What are the functions of money and explain how money has changed through history?
Please read your notes and use your text book to answer the question. Read the whole chapter to give yourself extra information and please read from pages 27-28 about the history of money.
Your answer needs to be at least 150 words long. Its important that we practice writing long answers, as this is often the hardest part of the exam.
Good luck and let me know if you have any problems before the homework is due in.
(Minimum of 150 words and due in on Thursday the 4th of October.)
What are the functions of money and explain how money has changed through history?
ReplyDeleteFunctions of money
Money is a good that acts as a medium of exchange in transaction. There are four main functions of money which I’ll talk about:
• Medium of exchange.
The most important function of money is that it is a medium of exchange to facilitate transactions. Before money was invented they used barter, which involves direct exchange of one good or service for another, but there was a problem barter could only take place if there was a double coincidence of wants between the two changers. This makes it very difficult to have what you want so nowadays it is much easier to change things by using money.
• Money is a measure of value.
Money also functions as a measure of value. Using money helps traders to avoid the problems when fixing a prize of goods and services this enables both the supplier and the buyer of the good to make the correct decision about how much of the good to supply and how much of the good to purchase.
• Store of value
In order to be a medium of exchange, money must have the same value over time. If money could not be stored for some period of time and still remain valuable in exchange, it would not solve the double coincidence of wants problem and therefore would not be adopted as a medium of exchange.However today some people save by storing valuble antiques and works of art, things that we do not regar as money but which can be exchanged for money in the future.
• Money is a means of deferred payment
When a person buys goods on credit the consumer has the use of the goods but does not have to pay for them immediately. The consumer can pay after he or dhe receives the goods bit by bit. Credit in a barter system would be very confusing and open for cheating.Using money to pay after you recieve the good is a big function on money.
How money has changed during history
There has been five main stages in the development of money.
Stage1:
The earliest form of money was goods. However such commodity money was quickly abandoned because many of the goods did not possess the essential characteristics of good money.
Stage2:
Precious metals, such as gold and silver have always benn scarce enough to be money. However trading with metals involved carrying around a weighing scale and tools to cut the metals.
Stage3:
The problem of the portability of metals led to coinage. But one problem remained, throughout history the temptation to clip coins, trimming a fine filing of the precious metal from the edges.
Stage4:
The first paper metal was issued by early goldsmiths who accepted deposits of precious metals. In return they issued a paper receipt to the owner.
Stage5:
Goldsmiths receipts for deposits of precious metals were to become the first paper money.In most countries today only central banks havethe right to issue notes and coins.
FUNCTIONS OF MONEY
ReplyDeleteThe Big Question: What are the functions of money and explain how money has changed through history?
-Medium of exchange
Money is a medium of exchange and is generally accepted as a means of payment. It overcomes the problem of a double coincidence of wants. Money has been performing an important function as a medium of exchange and makes it easier to pay for goods rather than having to barter as they did before money had ever existed. Bartering is an exchange of goods or services that was used when money did not yet exist; the only problem with it was that there was no fixed exchange rate of what things were worth.
-Measure of value
The price of a good or service can be measured in terms of money. Knowing the value of what things are worth means that it enables the supplier and buyer of the good to make decisions about how much of the good to supply and how much of the good to purchase.
-Store of value
Money holds its value over time subject to the rate of inflation i.e. if inflation is low, money holds its value relatively well, however, if there was a period of stagflation money does not hold its value. If money had a limited shelf life it would not be worth as much.
-Deferred payment
Buying goods on credit, means that you don’t have to pay for them immediately. The buyer can pay for the good or service over a period of time after he/she receives it which makes it easier for the person to buy the product.
Money
ReplyDeleteMoney is something which all of us know, as it is present everywhere; no matter where you go you will always be in an area where money is being exchanged, repeatedly in order to obtain other goods. Money is a medium of exchange and is mainly in the form of bank notes and coins, though throughout the history, it has not been like this, not even similar; there was barter instead.
Barter is a way of trading which consisted in exchanging goods, which occasionally had many disadvantages as a “double coincidence of wants”. This means that, if for example, you want to buy a loaf of bread, and you have a bunch of grapes, to obtain your want the person who was selling the bread must also accept your grapes. It may work for some cases, but not for all as maybe the other person has already been given more grapes, so the “double coincidence of wants was needed”. But sticking to this method of trading, the most common goods where knives, beads and shoes. Other valuable goods where silver and gold as they were scarce, though a main issue was that it was neither easily divided nor portable. So, finally, they came up with the idea of creating coins and notes. And this is the history of the money.
Money has many functions such as being a medium of exchange. It is also generally accepted and overcomes the “double coincidence of wants”. Money is measured, you may have 1 $ or 50$, therefore it is a measure of value. Nowadays nearly everybody saves money as it is a store value; you can save it and it will always keep its original value. As time passed by and the society changed, we have created bank accounts, and we know give credits, this makes money become a deferred payment.
The functions of money
ReplyDeleteBefore money barter was the principal means of exchanging goods. But this system was very faulty as it required a double coincidence of wants, or in other words you had to want what the other had and the other had to want what you had. Then came money which had several functions that allowed it to overcome that problem.
Money is a medium of exchange: money overcomes the problem of the double coincidence of wants by becoming generally accepted for other goods, so if you want apples but you only have milk you can sell your milk for money and buy apples with the money you got.
Money is a measure of value: money is used to measure the value of things, so instead of an apple being worth, a lump of cheese or a pencil or a liter of water, it would be worth a euro and therefore it can be compared to other things.
Money is a store of value: many things will rot if left unattended for a long time, and some others will occupy a big space therefore if we had to store those goods they would eventually lose their value. But money can be stored in a small place and it will maintain its value.
Means of deferred payment: when a person buys things on credit they will be able to use the good but pay for it later and in portions, this can be done in a very cheeky way if you have to do it with apples for example, and i.e. in a month will the apples be fresh? Will they be big or small apples? Money can overcome this problem because it does not rot and it is always the same size.
The history of money
There have been 5 main stages in the development of money each stage represents one change in the form of money used.
Stage 1
The first money developed were goods, this is known as commodity money, it was anything that everyone would be willing to accept. This was fast abandoned because many of the things did not have the main characteristics of good money like, divisibility, portability, durability, scarcity.
Stage 2
During this stage the money accepted was precious metals this was good because they were scarce enough to serve as money but on the other hand trading with metals involved carrying scales and cutting tools.
Stage 3
During this stage the money became coins wich had a specific value and there for made easyer the trading. Also the pricing was made easyer. On special ocasions the coins were called in for reminting and would be mixed with cheap metals to produce more coins and make the rulers richer. This made the coins´ metal virtualy worthless but they were stil accepted.
Stage 4
The first paper money was issued by early goldsmiths who would use their safes to keep the client´s gold safe, they would give them a recipit that would represent the gold. People soon realized that exchanging the paper would be much more practical than geting the gold out of the safe to give it to someone who would re-deposit it in a safe. Like this the first paper money was born and the first banks were also born.
Stage 5
This is what we know today for money which evolved from the money mentioned in Stage 4.
By Javier Silva
The Functions of Money
ReplyDeleteThere are many problems involved with the barter system of exchange, and that is why we have money. Money works so much better as it has certain functions which overcome the problems with barter. The first of these functions is that money is a medium of exchange which means that it is generally accepted as a means of payment for goods and services, which overcomes the problem of needing a double coincidence of wants.
The second function of money is that it is a measure of value, which means that the price of a good or service can be measured in terms of money, so you can compare the value of any two goods using the measure of money. Using money helps traders to avoid the problems of fixing prices of goods and services in terms of all other goods and services.
Money is also a store of value, which means you can save and store money as it keeps its value, no matter how long you store it. Saving the money means you can use it at a later date. The goods might go bad and you would not be worth as much, but the money will always keep its value.
Lastly, money is a means of deferred payment. This encourages payment using credit, which means that you don’t have to pay immediately for the goods. You can have the goods now and pay for them at a future date.
The History of Money
There have been five main stages in the development of money. In the earliest stage of money goods, such as knives, beads and shoes, were used because many people were willing to accept these in exchange for their produce. However this commodity money was abandoned as the goods did not possess the essential characteristics of good money.
In the second stage of money precious metals, such as gold and silver, were used as they were always scarce enough to make possible money. However, this was also quickly abandoned.
In the third stage of money, the problem of portability that cursed metal meant that coinage appeared. Precious metals with different weights were often stamped with the face of the king or queen, with another stamp to show their value. But once again, this idea was abandoned.
The fourth stage started when paper money appeared. The first paper money 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 soon realised that this method was far easier than what they had before.
The last stage of money is what we have now. The goldsmiths’ receipts for deposits of precious metals were to become the first paper money, and goldsmiths the first banks.
History of Money
ReplyDeleteAt first barter was the most common source of money, it consisted on the swapping of goods and services which each produced. Although throughout the years money has been changing e.g. Precious metals
The history of Money can be divided into 5 stages, the earliest form of money was goods, however such commodity of money was quickly abandoned as many of this goods didn’t follow the essential characteristics of money. After this came the precious metals as being another form of money, as they were scarce it was a good source of money although this involved carrying them around. This leaded to the development of coinage although this carried another problem such as having the temptation to ‘clip’ coins. After this came the idea of having paper as money, the last stage of money was known as the goldsmithsas receipts for deposits of precious metals were to become the first paper money.
Functions of money
Money is often defined in terms of the four functions or services that it provides. Money serves as a medium of exchange, as a store of value, money is a means of deferred payment and money is a measure of value
Medium of exchange. Money's most important function is as a medium of exchange. Without this, we would have to use the system of barter, which involves direct exchange of one good or service for another. The difficulty with this is that in order to obtain a particular good or service from a supplier, one has to possess a good or service of equal value. This is known as a double coincidence of wants. Money effectively eliminates the double coincidence of wants problem by serving as a medium of exchange. Another function of money is that money is a Store of value. Which means that you can save money as it never loses its value, in the method of barter the good you are trying to sell might have lost value if you tried to save, this good became worthless, whereas you can save money and save it for the future. Money is durable. Money is a means of deferred payment. Encourages people to buy with credits as when someone buys a good they don’t have to pay immediately, the consumer can pay after he/she receives the good, this helps people, it is much easier for the consumer to pay later date. Money is a measure of value. The price of a good or service can be measured in terms of money. With money you can compare between the cheapest good, you can compare the value between two goods
Money
ReplyDeleteMoney was invented because it overcome the problems of the barter system.
Money is a medium of exchange. It's accepted as a form of payment throught the world. You exchange your good or service for money, and then you exchange that money for another good or service you need. It's also a measuer of vale, you can compare the value of goods using the measure of money. The price of every good or service can be measured with money. Money can be stored. Before many goods went bad as time passed, so it wouldn't worth as much. but maney can be saved.Instead, money can be saved and used in the future without it's value being decreased. It is also a mean of deferred payment. It means you don't have to pay imediately for goods. This helps the people with their payments, as the goods can be paied in the future.
History of Money
The history of money can be divided in five stages.
Stage 1: At first goods were used as a form of money. People used beads, shoes, food... However this din't last long because this goods didnt have the essentials of good money: portability, scarcity, durability and divisibility.
Stage 2:Precius metals such as gold and siliver were used as money. This were scarce enough to be moeny, however they were to heavt to be carried around and it involved carrying around the necessary tools to cut the metals.
Stage 3:People started developing coinage. The coins were stamped on one side with the face of the king or queen, and on the other side another stamp showing it's value. However there were still to problems. First there was the temptation to clip coins. This was resolved later on with the invention of the ribbed edge on coins. The other problem was that rulers used to debased them. On special occasions coins would be called in for raminting. The ruler woukld then mix the gold or dilver with cheap metal, and would produce six coins instead of four and keep two of them. Now we kno the metak of coins is worthless, but people still acceot such coins as money.
Stage 4:The first notes were issued by goldsmiths. This will accept keeping in safety the precious metals, and woukd give in retourn a paper receipit to the owner. These paper receipits were soon used as money, as they were easier to exchange for goods than money.
Stage5: Nowadays this paper receipit papers are known as notes, and goldsmiths the first banks.
The Functions of Money
ReplyDeleteBefore, people used the barter system to get good and services to satisfy their wants and needs. However this system had various problems, fixing a rate of exchange, you didn´t really know if you were paying a reasonable price for a good. Another problem was that you had to find someone with a double coincidence of wants, for example you need to find someone who will accept your apples for some oranges. Finally the last problem with the barter system was that you couldn´t save, for example if you could not save your goods, because if they were apples or any food type, they would be rotten just a week later and would of lost their original value.
That is why we now have money instead of the barter system. Money has several function, just the barter system, its a medium of exchange which overcomes the problem with the double coincidence of wants, as well as it is generally accepted by all the population to pay for goods and services.
One of the big problems with barter was the rate of exchange, another function of money is that its a measure of value, it allows you to compare 2 goods without being doubtful of the good or service being sold at their original price and value.
Saving with the barter system was almost impossible, however money overcomes this problem, it doesn´t matter how much time that money has been outside, it keeps its original value, with goods this wasn´t posible, they would rot. Money can be saved and kept for future use.
Finally money provides us with a way to diferred payment, allow the society to buy a good eventhough they don´t pay it immediatly, thy use credit. this is usually done with credit cards, which are much more used than coins and notes, for example in 2006, notes and coins were only used a 3.36%, so credit card were used a 96.64%.
The History of Money
Money has changed over time, and their have been 5 main stages in the history of money.
The earliest form of money were goods, beads, shells, knives anything that had a value. But this commodity money was stopped using by the society because it didn´t include the essential characteristics of money; divisibility, scarcity, durability and portability.
After the goods, came the precious metals, such as gold, silver... on one hand it was a good idea to use them as money because they were quite scarce, but on the other hand it ment that you had yo be carrying a weighing scale and tools to cut the metals, which meant that there wasn´t any type of portability in them.
After the precious metals didn´t work as money because of their difficulty of transport, they decided to divide these metal into coins of different weights and value, however the of coin clipping appeared, so they decided to ribb the edge of the coin so they wouldn´t be clipped. However ruler may of mixed cheap coins metals with silver and gold coins, causing that today the metallic content of coins are nearly worthless, but people keep accepting them as an exchange.
People started taking their savings to goldsmiths, which would give the person giving them their money a paper noting how much money they had, people found out this was much easier than taking the metal around all the time. So that is how people started using paper instead of precious metals.
Today, we have a central bank in our country who gives out the coins and the notes, but these can no longer be exchanges into gold. We now use notes, coins and especially credit cards.
In the beginning, people bartered. Barter is the exchange of a good or service for another good or service, an example is exchanging an apple for a loaf of bread. However, what if you couldn't agree what something was worth in exchange or you didn't want what the other person had, this problem was called is called double coincidence of wants. To solve that problem humans developed what is called commodity money. The material form that money has taken has changed considerably. From cattle and cowrie shells to today’s credit cards, coins and bank notes. Money has function but its main functions were to overcome the problems which barter had, some of the main functions that good money has are:
ReplyDelete-Acceptability: Anything can be used as money as long as it’s generally acceptable. The money that we use nowadays is called token money as the money itself is worth much less than the face value, an example can be a bank note as it’s made out from paper.
-Durability: Any good money such be hard wearing. As money that breaks easily will be useless. So coins and notes must be strong and durable so they may act as a store of value.
-Portability: Any good money should be easy to carry. A large amount of pebbles is too heavy to carry around and won’t easily fit in your pocket.
-Divisibility: Good money should be possible to be divided from a large value into smaller quantities to make small purchases or give change, without it losing value.
-Scarcity: Money should scarce as then people will value it as a commodity that can be used in exchange.
There have been five main stages in the development of money since its invention, which object was to make good money. The stages are the following:
-Stage1:
The first form of money was goods, such as cattle, cowrie shells…. However such money was quickly abandoned because many of the goods did not possess the essential characteristics of good money.
-Stage2:
Precious metals, such as gold and silver have always been scarce enough to be money. However trading with metals involved carrying around a weighing scale and tools to cut the metals.
-Stage 3:
The problem of the portability of metals led to coinage. But one problem remained, throughout history the temptation to clip coins, trimming a fine filing of the precious metal from the edges. It was a good method nevertheless as the first one it had its inconvenients.
-Stage 4:
The first paper was issued by early goldsmiths who accepted deposits of precious metals. In return they issued a paper receipt to the owner. This improved drastically, its similar to checks.
-Stage 5:
Goldsmiths receipts for deposits of precious metals were to become the first notes. In most countries today only central banks have the right to issue notes and coins. This is the final stage of the development of money till today.
History of money
ReplyDeleteBefore money existed, there was a system known as barter. It consisted in finding someone that you can change your goods with that person's goods. But it wasn't really effective, so money was created to solve the problems in bartering (e.g. double coincidence of wants).
Precious metals were scarce, so those were used as money. But there were problems, for example, people were carrying tools like weighing scales to weight the amount of metal, so it was inconvenient.
Then it was the development of coinage. Precious metals were stamped with the face of the king or queen and another stamp for their value. But there were problems again, for example, some rulers mix cheap metals with precious metals, producing more amount than the original number of coins so that they can get benefit for themselves.
Later, paper money was created, and it had a good effect in society.
Functions of money
There are four main functions of money:
Money is a medium of exchange: it is generally accepted for exchange of goods, this overcomes the problem of double coincidence of wants in the barter system.
Money is a measure of value: Money helps the problems of fixing prices of the goods and services, this overcomes the problem of deciding the amount of goods exchanged in the barter system.
Money is a store of value: Money can hold its value over a long time, as long as the value does not change. This means it can be saved so that it can be used in the future. This overcomes the problem of saving goods and bringing other problems in the barter system. But sometimes money cannot be a good store of value, for example when there is a continued rise in prices (inflation), money loses its value.
Money is a means of deferred payment: It can be turned into credit, which is a form of paying which consists in taking the goods but no need to pay immediately. It can be payed in a future date.
OK. Well done everyone.
ReplyDeleteThis homework did require you to read and formulate a good long written answer. Most people have lost marks for listing information. Please remember to write full sentences.There was also a lack of answering the question with a good introduction or nice linking sentences or analysis Remember to try to give examples and statistics to help your answers.
REMEMBER.....Its our fist go, so do not worry if the grade you got was not what you were hoping for!
Here are your marks:
Diego C- (you listed the information, you need to form sentences and use an introduction to your answer)
Sophie C- (you need to be more careful to answer the question, you listed the information, you need to form sentences and use an introduction to your answer, needs to be a longer answer)
Cristina B (Very good answer)
Javier C ( A good answer, but you have listed a lot of information)
Patricia B+ (An excellent answer, well written and clearly answering the question)
Carlos B- (very good answer, maybe you should stated your answer with the functions of money and gone into a discussion about the history of money)
Sonia C (good answer but you have not written enough about the functions of money and you have listed information)
Marta A (excellent answer, well structured and a good use of statistics)
Pepe C- (you have confused the functions of money with the characteristics of money and you have listed information)
Lily Liu C- (you have listed your answer, try and answer the question with a good opening sentence and link the information, please write a longer answer)
NOT ON THE BLOGSPOT:
Maggie B (good long answer with lots of information and well structured)
Paula B (good answer with a good use of the information, some listing of information)
Andrea B (good clear answer)