accepted by the people in the society. They have to believe in its value or it won't
become a medium of exchange.
Paper
money and coins, which together are called currency,
are common
form of money. They are a medium of exchange in most countries because they are
accepted for their value. You will accept paper money or coins for your work, for
example, in a sports equipment store.
A second reason why money works better than bartering relates to value in a
cave society, jewelry was not considered as valuable as tools. How do you
determine what the jewelry is worth? That's where money can be very helpful. In
determining the value or worth of one thing in relation to another, money becomes
a
standard of value
. The jewelry is worth so much money.
The tools are worth
this much money. Money has become the common standard of value. And it's
much easier to compare values by looking at price tags than by comparing one
item to another.
American standard of value is
the dollar and all the coins, like pennies and
nickels, that are part of the dollar. Other currencies serve the same purpose in other
countries. Goods and services are valued
in terms of rubles in Russia, pesos in
Mexico. What the money is called or how it looks doesn't really matter. What
matters is that it is accepted as a medium of exchange
and a standard of value
within that nation.
There is a third important function that money serves, which bartering cannot.
In some tribal societies, cattle were swapped for other things. But cattle grow old,
and as they grow old they are usually worth less. Eventually, they die. It wouldn’t
be very useful, then, to save cattle as a means of increasing your future purchasing
power. Money, on the other hand, can be stored or kept for later use. It has a
