Group 5 Flashcards
Money acts as an intermediary in exchange, eliminating the need for barter systems.
Facilitates Trades
It standardizes value and simplifies transactions, allowing individuals to trade goods and services efficiently.
Facilitates Trades
Money is a generally accepted financial instrument used for various purposes within an economy, such as purchasing goods and services, paying for debt, and saving for the future.
Financial Instrument
Money allows for the accumulation of wealth, enabling individuals and businesses to save and invest, generating economic growth and prosperity.
Wealth Accumulation
Early forms of trade relied on direct exchange of goods and services without a medium of exchange.
Barter System
This system had had significant limitations, most notably the double coincidence of wants wherein both parties had to want exactly what the other offered.
Barter System
The earliest evidence of minted coins comes from China, marking the transition from commodity money to more standardized forms of currency.
Coinage in Ancient China
Coins were durable, easy to carry, and had intrinsic value from precious metals like bronze, silver, and gold.
Coinage in Ancient China
This system provided a standardized value, however, as these items had their own worth, they still faced limitations such as spoilage or difficulty in transportation.
Commodity Money
The introduction of commodity money, using valuable materials such as animal skins, salt, grain, or weapons.
Commodity Money
Around 500 BCE, the use of coins also spread to Europe. Coins were made using electrum, a naturally occurring alloy of gold and silver, and were one of the earliest forms of standardized currency used in the Western world.
Coins in Europe
where the first government-backed paper currency, known as jiaozi, was issued to solve the practical issues of using heavy metal coins for trade, especially over long distances.
Paper Money in Yuan Dynasty
The Yuan Dynasty’s paper money was called _______ and was made from the inner bark of mulberry trees, which was sturdy and durable.
“Chao”
European economies were essentially on a precious metal standard, where currency value was directly tied to the amount of gold or silver it represented.
Coins as the Main Currency in Europe
By the 15th century, Europe began to adopt paper banknotes, largely driven by banks that issued paper as a stand-in for metal coins.
Introduction of Paper Banknotes
derives its value from the underlying material it is made from, such as gold or silver.
Commodity Money
There is a monetary system called the “gold standard” in which the value of a country’s currency is directly linked to gold. This standard converts paper money into a fixed amount of gold.
Commodity Money
Its value is inherent and directly tied to the material’s market price.
Commodity Money
is declared legal tender by a government and does not have intrinsic value.
Fiat money
Its value is based on trust and confidence in the issuing authority and the stability of the economy.
Fiat money
value can fluctuate based on the stability of the issuing government, inflation, and monetary policies.
Fiat money
Functions of Money
- Medium of Exchange Money
- Unit of Account
- Store of Value
- Standard of Deferred Payment
Money provides a common standard for measuring the value of goods and services, enabling comparisons and facilitating economic calculations.
Unit of Account
Money can be saved and accumulated, allowing
individuals and businesses to preserve purchasing power over time.
Store of Value
