The History of Money

1.Which are the three classic jobs of money? Select all that apply.

Several answers can be correct.

Economists say money does three jobs: medium of exchange, unit of account and store of value.

2.Which job of money is described as a common yardstick for prices?

The unit of account lets everything be priced in the same units.

3.Imagine a market with 100 goods and no money. How many swap rates (prices) would you need, one for every pair of goods?

Without money, every pair of goods needs its own swap rate. For 100 goods the exact count is 4,950.

4.With money as a shared unit, how many prices do 100 goods need?

A shared unit cuts the list from 4,950 swap rates to one price per good.

5.How many swap rates do ten goods need without a shared unit?

With three goods you need 3 swap rates. With ten goods, already 45, by the rule: goods times one less, divided by 2.

6.Marge has bread and needs shoes. Leo makes shoes but wants fish today. What is the problem?

Without money, both sides must want what the other has. Money lets Marge sell bread to anyone and pay Leo for the shoes.

7.About how old are the earliest known coins?

Early coins date to the late 7th century BCE, so more than 2,600 years ago. Dating of the very first coins is debated.

8.What were the first coins made of?

The first coins were a natural gold-silver alloy; later, pure gold and pure silver coins followed.

9.At the Bretton Woods conference in 1944, the US dollar was tied to gold at how many dollars per ounce?

The dollar could be swapped for gold at a fixed 35 dollars per ounce until 1971.

10.True or false: in 1971, foreign governments could no longer swap dollars for gold.

In 1971 the link between the US dollar and gold ended.

11.True or false: anthropologists have found a pure barter economy from which money grew.

Anthropologists did not find the barter villages of the classic story. This point is debated in research.

12.Why does fiat money have value?

Fiat money is worthless as material and valuable because we all agree it is.