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From Karnataka Open Educational Resources
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'''Please describe the key ideas to be conveyed in this section. Also broken down in details by each idea'''
'''Please describe the key ideas to be conveyed in this section. Also broken down in details by each idea'''
==Key Idea #==
==Key Idea 1 - Introduction to Money and Credit ==
Purpose of Money
Purpose of Credit
Role of money and credit in modern economy
===Learning objectives===
===Learning objectives===
===Notes for teachers===
===Notes for teachers===
*Question Corner
*Question Corner
==Key Idea #==
==Key Idea 2==
Evolution of Money
===Learning objectives===
===Learning objectives===
To understand about the history and evolution of money as we know it today
===Notes for teachers===
===Notes for teachers===
Money, as we know it today did not always exist in its current form.
Barter system: In early days, around 9000 B.C., the barter system was used. Under this sysyem, goods were exchanged for other goods. For example, if you wanted had an extra cow and wanted some rice, you had to find someone who was wanted a cow and had some extra rice. This method was convenient in that day and age but it suffers from the following disadvantages:
Double coincidence of wants: For successful barter, both parties would need to have what the other wants.
Common measure of value: It is difficult to assign equal value to the goods to be exchanged. In the above example, how much rice is equal to one cow?
Indivisibility of goods: Under barter, goods cannot be divided easily. In the above example, if you both decided that the rice was equal to half a cow, it is not possible to divide the cow in exchange for the rice.
Difficulty of storing wealth: Since people usually used perishable goods to exchange, storing of wealth became difficult.
Because of these difficulties of the barter system, commodity money came to be used.
Commodity money: Because some commodities were demanded more than others (because of their utility), they became the standard of measurement and exchange. Some examples are cattle, salt, wood, sugar, cloth and tobacco. Some words we use today when talking about money, are based on some of these commodities. The word capital comes from the Latin word capita (head). The word salary comes from the use of sal (salt) in Rome as payment for services.
However, due to problems such as indivisibilty of commodities and problems of storing, commoduty money evolved into metallic money.
Metallic money: Metal was commonly used to make utensils and weapons. Because of advantages such as easy storage, divisibility, and convenience, metal became the accepted standard of value. At the beginning, it was used in its natural form, later as ingots, and further as objects such as rings and bracelets. Metal objects became valued commodities. These later evolved into the first coins, around 7th century B.C. Coins were small metal pieces, with fixed weight and value, bearing an official seal. The seal indicated who minted them and also a guarantee of their value. Gold and silver coins were common in Greece. Goldsmiths that minted the coins delivered receipts, as a guarantee. With time, these receipts were used to make payments, and eventually evolved into paper money.
Paper money: This became the accepted standard, and the government assumed the role of sole issuer of notes. Today, central banks of most countries are responsible for printing notes and minting coins as currency. In India, the Reserve Bank of India is in charging of printing money. For more information on how money is printed in India, visit this.
Bank money: Today, money is also in the form of cheques, bank drafts and credit/debit cards. They are more convenient than carrying large amounts of cash.
===Activity No # ===
===Activity No # ===
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