Topic 1 - Overview of Money and its Function PDF

OVERVIEW OF MONEY AND ITS FUNCTION THE EVOLUTION OF MONEY Errish Jake Abitong Faculty, Financial Management What are your thoughts about this… “Money is the root of all evil.” “Money is the source of happiness.” WHAT IS MONEY? WHAT IS MONEY? According to D.H. Robertson, “Anything which i...

OVERVIEW OF MONEY AND ITS FUNCTION THE EVOLUTION OF MONEY Errish Jake Abitong Faculty, Financial Management What are your thoughts about this… “Money is the root of all evil.” “Money is the source of happiness.” WHAT IS MONEY? WHAT IS MONEY? According to D.H. Robertson, “Anything which is widely accepted in payment for goods or in discharge of other kinds of business obligation, is called money.” - Money is any thing which is used as a medium of exchange. THE EVOLUTION OF MONEY The word “MONEY” is derived from the word “MONET” The origin of money is nowhere to be found. MONEY OF MODERN SOCIETY Hunting society Pastoral society Agricultural society  HUNTING SOCIETY Until about 12,000 years ago Hunting animals, gathering vegetation Their productive technology was their primitive weapons. The skin of wild animals was used as money. PASTORAL SOCIETY From 10,000 to 12,000 years ago Domestication of animals and cultivation of plants Their productive technology was their primitive weapons Livestock were used as money. AGRARIAN SOCIETY About 5,000 years ago Cultivation of a vastly more extensive field Their productive technology was plows and draft animals. Grains and food were used as money.  WHY DID PEOPLE DEVELOP THE MONEY WE HAVE TODAY?  DIFFERENT STAGES OF MONEY COMMODITY METALLIC PAPER MONEY MONEY MONEY CREDIT ELECTRONIC MONEY MONEY  COMMODITY MONEY When different commodities were used as a medium of exchange. LISTED BELOW ARE THE PROBLEMS THAT CAN BE ENCOUNTERED WITH COMMODITY MONEY: Storing Problem Durability Problem Transportation Problem Divisibility Problem  METALLIC The metallic MONEY money started when precious metals like gold, silver, and copper were discovered. Precious stones were use as money.  METALLIC MONEY ONE OF THE EARLIEST EXAMPLES OF SUCH TRANSACTION CAN BE QUOTED IN GENESIS 37:28 So when the Midianite merchants came by, his brothers pulled Joseph up out of the cistern and sold him for twenty shekels of silver to the Ishmaelites, who took him to Egypt. EARLY FORMS OF METALLIC MONEY EUROPEAN MEDIEVAL PERIOD EARLY CHINESE COINS ANCIENT GREEK AND ROMAN EMPIRE  TYPES OF METALLIC MONEY UNCOINED METALS COINED METALS Metals were not used as a coin As a next step, standard coins but a bullion. were created. This creates a problem of They had a standard weight and measuring the weight and value. value. Supply of money also became a Problems of uncoined metals problem when mines were fully dissolved. used. COINED METALLIC MONEY CAN BE: Fully Bodied Coin Whose face value equals the face value of the metal contained in it. Token Money Whose face value is higher than intrinsic value.  PAPER MONEY Paper money refers to the notes issued by the state, governs by a central bank.  CREDIT MONEY Credit money is monetary value created as the result of some future obligation or claim. As such, credit money emerges from the extension of credit or issuance of debt.  ELECTRONIC Electronic money (e-money) is broadly defined as an electronic MONEY store of monetary value on a technical device that may be widely used for making payments to entities other than the e- money issuer. The device acts as a prepaid bearer instrument which does not necessarily involve bank accounts in transactions. FUNCTIONS OF MONEY 1. Medium of Exchange - exchange of goods and services straightforwardly. 2. Store of Value - A man who wants to store his wealth in some convenient form will find money admirably suitable for the purpose. 3. Unit of Account - It is a unit of account and a standard of measurement. (Divisible, Fungible, Countable) 4. Standard of Deferred Payment - It forms the basis for credit transactions.  WHY MONEY IS USEFUL 1. Durability 2. Portability 3. Divisibility 4. Uniformity 5. Limited Supply ACTIVITY NO. 1 (by group) DESIGN YOUR OWN CURRENCY Instructions: 1. Each group may use any editing tool for the design 2. The entry must create a design for both the obverse and reverse side of the bill. 3. The design must highlight any past President, Hero, Famous Personality or Tourist attraction in the Philippines. 4. Each group must also include the captions