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CH 8] Business 101 8-3

Examples of old forms of money include (at left) the oldest known paper currency
issued in China during the Ming Dynasty between 1368 and 1399; (center) a silver
tetradrachm used in Athens, Greece, in the fifth century B.C.; and iron bells without
clappers used as bride money in Zimbabwe in the nineteenth century.

c1901.gif

Photo source: Smithsonian Institution. National Numismatic Collection photo.

supermarket will be described. These sweeping changes in the structure and operations
of financial institutions have a profound effect on the financial decisions and practices
of both business firms and individual households for the remaining years. Our starting
place for your understanding and analysis is with money.

Money in Exchange Economies
In our economies we recognize that individuals cannot efficiently produce
everything that they need to survive, so exchange takes place. What is exchanged is an
exchange in assets (things that are owned). In industrial economies move people away
from agrarian societies with the outcome that that you do not grow your own food,
sew your own clothes, build your own car, home or computer. Though with some of
these enterprises you could. Economies allow very skilled individuals to accomplish
many tasks to produce finished goods that are exchanged, because they do it
efficiently and cost affectively. You may acquire those things through exchange. You
can barter for them (give something of value other than money) or pay for them with
currency.
Historically, objects have been used in exchange (barter). If we lived in Ireland
300 years ago, we could acquire two acres of land for one cow. The cow is valuable
because it could produce milk, from which the owner could harvest milk, and then
with the excess manufacture butter and cheese. The cow could produce offspring that
could eventually be added to the milking herd or raised for meat, and the hide 8
converted to leather. The owner could also trade the cow for other goods. However,
say, you only want one acre or were interested in three acres of land; the problem that
arises is that one acre or one additional acre would require one-half of a cow. The
problem to be resolved is how to affect the exchange without damaging the value of
the cow? It is easy to recognize the problem here is one of divisibility.
Cows are not the only things of exchange value (barter or money). The list of
products that have served as money is long, including such diverse items as wool,
pepper, tea, fishhooks, tobacco, shells, feathers, salt (from which came "salary" and
"being worth one's salt"), boats, sharks' teeth, cocoa beans, wampum beads,
woodpecker scalps, paper script, and precious metals. For a number of reasons,
precious metals gained wide acceptance as money. As early as 2000 B.C., gold and
silver were used as money, and up until 1933, gold coins were used as money in the
United States.

Learning to Do, Doing to Learn, Earning to Live, Living to Serve
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