Money: Its functions and Properties

Lesson Objectives

At the end of this lesson;
● I will be able to outline the functions and

characteristics of money

● I will be able to explain why the different types of

money have value

Introduction to Money: Functions and
Properties

Welcome to our exploration of money, its functions,

and properties. This presentation will guide you

through the essential concepts of money, from its

basic definition to its role in our modern economy.

Understanding money is crucial for high school

students as I prepare for financial independence,

higher education, and future careers. We'll cover

topics like the evolution of money, its primary and

secondary functions, and how it impacts our daily

life and future financial decisions.

Understanding Money: A Key to Financial
Success

DISCUSSION

Alright class, let's play a quick game before we dive into today's lesson.

Imagine you're stranded on a deserted island. You have a backpack with five items:
a loaf of bread
a bottle of water
a shiny rock
a photograph of your favorite celebrity, and
a $20 bill.

• Which of these items would be most useful to you on the island, and why?

• Could you use any of these items to trade with someone else who's also stranded?

• Why would the $20 bill be practically useless in this situation?

500 B.C.: First coins made from precious metals appear

1200 B.C.: Cowrie shells become widely used currency

9000 - 6000 B.C.: Cattle and grain used as early forms of money

What is Money?

Primary Functions of Money: Medium of
Exchange

Facilitating transactions and overcoming
barter limitations

●Enables direct purchase of goods and services

●Eliminates need for double coincidence of wants

●Reduces transaction costs and time

●Facilitates both local and global trade

Primary Functions of Money: Measure of
Value (unit of account)

Measure of Value

Example: Eggs vs.
Bread

●Standard unit to express worth of
goods/services

●Enables easy comparison of different
items

●Facilitates economic calculations and
decision-making

●1 egg costs approximately 0.067
BHD

●1 pack of bread costs about 0.100
BHD

●Money allows simple value
comparison between items

Primary Functions of Money: Store of
Value

●Money serves as a store of value, allowing individuals to preserve

wealth over time. This function enables people to save for future

purchases or investments.

●For example, you can keep money in a savings account, where it

maintains its value and may even grow through interest.

●Investments in stocks or bonds are other ways money acts as a

store of value, potentially increasing wealth over time. This

function is crucial for financial planning and economic stability,

giving people confidence in holding currency for future use.

Secondary Functions of Money

Standard of Deferred Payments
Transfer of Value

●Facilitates lending
and borrowing
transactions

●Enables future
payments with
agreed-upon value

●Supports creation
of financial
institutions

●Allows purchases in
domestic and
international
markets

●Simplifies global
trade and currency
exchange

●Enables value
transfer across time
and space

Portability

Acceptability
and Durability

Scarcity and
Stability

Properties of Money

Divisibility

● Money can be

divided into
smaller units

● Allows for

precise pricing
of goods

● Facilitates

transactions of
any value

● Easy to carry

and transport

● Convenient for

everyday
transactions

● Enables

commerce
across distances

● Widely

recognized and
accepted for
payment

● Made of

materials that
resist wear

● Maintains value

over time with
proper care

● Limited in

supply to
maintain value

● Resistant to

sudden changes
in worth

● Provides

confidence in
long-term value

Properties of Money

Physical:
●Durability

○Must be able to last through
many transactions.

●Portability

○small ,light and easy to carry

●Divisibility

○Must be divisible so that
change can be made

●Uniformity

○Must have features and
markings that makes it
recognizable

Economic

●Stability of Value

○Value and purchasing power
must be relatively stable

●Scarcity

○Must be scarce to have any
value

●Acceptability

○People who use the money
must agree that it is
acceptable

Types of Money

Commodity Money
○Has value based upon the material from which it is made.
Examples; Gold or silver coins

Representative Money
○ Backed by something tangible
○ Paper money that could be exchanged for something else of value
Examples; Checks, Credit cards, gift cards

Fiat Money
○ Declared by the government and accepted by citizens to have worth
Examples; Paper currency (dollars, euros, yen, etc.), Coins in circulation

Individual Activity

​Red Team Lesson Activity: Money: Its Functions and Properties

Blue Team Lesson Activity: Money: Its Functions and Properties

Green Team Lesson Activity: Money: Its Functions and Properties

Final Assessment

Closing

​1. Money serves only as a medium of exchange.
2. Durability is an essential property of money.
3. Fiat money has no intrinsic value.
4. Divisibility refers to the ability of money to be easily divided into smaller units.
5. The store of value function of money means it can be saved and retrieved in the future with the same value.
6. Commodity money, such as gold or silver, is the primary form of money used in modern economies.
7. Portability is not an important characteristic of money.
8. Money acts as a standard of deferred payment, allowing for credit arrangements.
9. The unit of account function of money means it can be used to measure the value of goods and services.

​Answer True or False