Lessons 8 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
8
Exchange and money
Textbook: pp. 38–41
GoalExplains how exchange and money came about, distinguishes the properties and three main functions of money (medium of exchange, measure of value, store of value) and knows the kinds of money (cash, non-cash, plastic, electronic).
New words
exchange: selling, buying or swapping one product for another · ayirboshlashcommodity: a product made to be exchanged · tovarmoney: a special means of exchange meant for paying for goods and services · pulnon-cash money: money existing as records in bank accounts · naqdsiz pul
Explanation
In ancient times each tribe produced everything it needed itself (subsistence economy). Then occupations separated and people began to swap their products: a product made for exchange is called a commodity. Direct swapping (barter) is hard: a gardener may need a shirt, but the tailor may not need fruit. So a universal means of exchange – money – appeared: first pieces of precious metal, then coins (so that weighing was not needed), later paper money, and today plastic cards and electronic payments. Money should be convenient and compact, durable, limited in quantity (not something anyone can make), issued in different denominations and hard to forge. Money performs three main functions: medium of exchange (we swap goods for money), measure of value (prices are expressed in money) and store of value (money can be kept to spend later). In Uzbekistan the unit of money is the so‘m, issued by the Central Bank; money can be cash (banknotes and coins) or non-cash (records in a bank account).
Worked examples
Barter: a potter offers a jug and wants bread, but the baker needs a new skullcap, not a jug. With money the potter sells the jug to any buyer who wants it and buys bread with the money – exchange becomes easy.
In a shop bread costs 4 000 so‘m and a litre of milk 12 000 so‘m: the price is a measure of value. By these prices 1 litre of milk equals 12 000 : 4 000 = 3 loaves in value. If the mother pays by card, that is a non-cash payment.
Class activity
“Barter market”: pupils try to swap products from cards (a book, a pencil, an apple) without money; then “money” cards are introduced and the difference is discussed.
Practice
1
Name the three main functions of money.
Medium of exchange, measure of value, store of value.
2
100 000 so‘m was handed over in a shop. Three notebooks at 6 000 so‘m and a pen at 4 000 so‘m were bought. How much change in so‘m?
78000
3
Which function does money perform here? a) putting your salary on a card to spend next month; b) marking a book's price as 50 000 so‘m.
a) store of value; b) measure of value.
4
Why should money be hard to forge?
Because if forged money spreads, trust in real money is lost and money loses its value.