Money is What Money Does
Instructions:
On a separate sheet of paper, answer
items 1-6 under the headings Task and Read.
Then complete number 7 under the Process heading.
Evaluate all 7 items.
Introduction:
Throughout history, a wide variety of items have served as money. These
include gold, silver, large stone wheels, tobacco, beer, dog teeth, porpoise teeth, cattle, metal
coins, paper bills, and checks.
All of these types of money should be judged on how well they accomplish the functions of
money. Money is what money does.
To be a good medium of exchange, money must be accepted by people when buying and selling
their productive resources and when buying and selling goods and services. It should be portable
or easily carried from place to place. It also must be divisible so that large and small transactions
can be made.
To be a good store of value, money must be durable so it can be kept for future use. It also should
have a stable value so people do not lose purchasing power if they use the money at a later time.
To be a good standard of value or unit of account, money must be
useful for quoting prices. To accomplish this, money must be familiar,
divisible, and acceptable.
Task
1. Define and explain the functions of money.
2. Describe the characteristics that are needed to enable money to
carry out these functions effectively.
Read "Currencies In Crisis: A Beanie Baby Guide to a Grown-Up Problem "
3. How is currency like Beanie Babies?
4. Why don't we use Beanie Babies as currency?
5. Which function of money would a Beanie Baby have problems fulfilling?
6. Why aren't Disney Dollars accepted outside the Disney theme parks?
Process
7. Evaluate each item below as to how well it would perform the functions of money. In your
evaluation, discuss how well the item would serve as a - medium of exchange, b - store of value
and c- a standard of value. As you make your evaluations, be sure to consider portability,
uniformity, acceptability, durability, and stability in value.
a) Salt
e) Large stone wheels
b) Cattle
f) Gold
c) Copper coins
g) Pieces of paper printed by a government
d) A personal check
Adapted from © 2015. Council for Economic Education. http://www.econedlink.org/lesson/133 Currencies In Crisis
A Beanie Baby Guide To a Grown-Up Problem
By Fred Barbash
Washington Post Staff Writer
Sunday, February 7, 1999; Page H01
The currency crises of the past two
years have also created a crisis for
America's parents: What to tell the
children when they come home from
school, as they inevitably will, and
say, "Dad, Mom, why did they
devalue the Brazilian real?
(pronounced RE-al)"
"I don't understand that stuff, honey," is
not an acceptable answer. Herewith,
therefore, a parent's guide to currency
turmoil.
The most important thing to know is that
currency is like any other item that's
bought and sold--it generally obeys the
law of supply and demand. The greater
the supply of a currency, the less it's
worth; the less the supply, and the
greater the demand, the more that
currency will cost.
Be not intimidated by such arcana
as "currency boards" and "crawling
pegs." It's all just like Beanie Babies.
who buy them decide they like Furbies
more, perhaps because of an
irresponsible rumor that some Beanie
Baby baron is about to dump his supply
on the market all at once. The Beanies
already out there would become less
valuable. This would start a flight to
Furbies and the financial pages would
report that Beanie Babies declined
relative to Furbies.
Now, it's a shame that children have to
be exposed to this stuff at all. It's ugly
out there. And remember they may be
shy about bringing it up. Thus, parents
should prepare them for the possibility
of Beanie Baby panics ahead.
The main reason Beanie Babies have
value, apart from cuddliness, is that the
manufacturer made it known there
would be a limited number. Beanie Baby
speculators therefore could confidently
expect increasing demand and therefore
greater value.
A Beanie Baby panic would occur if
Beanie Baby owners started selling en
masse. (This is what has been happening
with the Brazilian real.) This decline
could be reversed if some large
institution, such as The Furb, intervened
to buy up Beanie Babies, reducing the
number in circulation and bolstering
their value.
The Beanie Babies are likely to hold
their value until and unless the people
This would be decided by Alan
Beanspan.
© Copyright 1999 The Washington Post Company
http://www.washingtonpost.com/wp-srv/business/longterm/feb99/currency/baby7.htm