Topic 1 Purposes of Money
The limitations of barter led people to create what?
Systems where the local community used an item they all valued as a means of payment.
The barter system relies on what?
-a double coincidence of wants -two parties agreeing on a rate of exchange -one party must have a surplus of a material to trade
What advantages did the spade/knife coins have over real spades/knifes?
-representational value -durable -portable
List some practical drawbacks with early forms of money.
-some items aren't durable- grains can rot, cattle can die -some items can't be divided to make low-value purchases/give change -early forms of money weren't portable; some stones used for trading measured 6m across
How many LETS are there across the UK?
About 300.
The word 'money' is thought to have its roots in...
Ancient Rome, where a mint was located next to a temple to the goddess Juno Moneta (meaning Juno the Protector).
There are also bartering websites that help put people with...
a 'double coincidence of wants' in contact.
A LETS is...
a local network which allows people to exchange goods & services without exchanging money.
Over time, people no longer claimed the coins from storage because...
buyers and sellers agreed the banknote represented the value of the coins and would accept the banknote as payment, knowing they could use it to make payments of their own.
Merchants who traded high-value goods found it impractical to...
carry large quantities of copper coin. Instead, they deposited the coins with a trusted person, who gave them written receipts stating how much was stored in their name.
Most modern payments are now made using...
coins and banknotes, or by transferring electronic balances between bank accounts.
However, barter systems still exist in some communities, especially where people have little/no cash. Some barter systems are...
informal, with friends and neighbours trading skills such as gardening, cake-baking or babysitting.
More formal systems exist too, such as...
local exchange trading systems or schemes (LETS), which operate on a system of credits without the need for cash.
Pieces of metal also began to be used as...
money.
An important factor in the development of money was...
moving from items with intrinsic value (value in their own right) into items with representational value, but had no value on their own.
China developed the idea of what around the 7th century CE?
paper banknotes.
Rather paying for goods with the actual coins, merchants paid by...
passing the receipt for the coins to the person selling the goods, who could claim the goods in storage.
The use of an intermediate item, such as cattle, shells or gold that all local people value as a form of money allows...
people to sell any surplus or specialist goods they produce for this intermediate item- sellers can then use the item they have been paid to buy other goods.
Different coins came to...
represent different values, and the value was written on them, just as modern coins come in different denominations (5p, 10p, 50p etc)
Over time, the coins were made into...
standard shapes that look much like round, modern coins.
The Brum LETS suggests...
that members charge a standard rate of 6 Hearts per hour, and equal value is placed on the services on offer- an hour of DIY = an hour of cleaning.
The coins produced from this mint from about 300BCE onwards bore an image of...
the goddess Juno Moneta and later became known as moneta, later 'money'
Give examples of valuable items used by communities in the past as 'money'.
Cattle, grain, cowrie shells, pigs, feathers, stones, leather, oxen, salt, vodka.
In return for helping people, people receive what from the LETS credit administration system?
Credits. Some examples include Edinburgh LETS which uses a credit unit called a Reekie or Brum LETS which uses a unit of credit called a Heart.
Gold was an intermediate item used as 'money' before the introduction of coins. What problem does using an item with intrinsic value create?
It is rare, in demand to make items like jewelry, the value can fluctuate, scarcity can affect the value of gold.
Metals like bronze and copper were used to make the coins. The coins themselves were successful as they had what?
No real intrinsic value, as the value of the metal was low. They had representational value, as local people agreed a coin symbolising a spade/knife had the same value as a real spade/knife.
Before money, what system did people use to trade goods or services?
The barter system.
In China, spades and knives were used as items which had intrinsic value. The development of money led to what...?
The creation of coins in the shapes of small knives and spades, which were used to represent a standard value where each coin was worth roughly the same as the real spade or knife. (representational value)
Metals like gold were valued because they could be used to make what?
Weapons, tools & jewellry.
