Why We Use Money
Written by Studio AM.
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Imagine a farmer who wants shoes and offers eggs in exchange. This direct exchange of goods is called barter. It can work if the shoemaker wants eggs. If the shoemaker wants bread instead, they need another arrangement.
Money makes this kind of trade easier. The farmer can sell eggs to one person, then use the payment to buy shoes from someone else. This works because people generally accept the money in payment. The farmer does not need to find one person who wants eggs and also sells shoes.
Money can also store value for later use. Fresh food spoils, while coins do not. However, the amount those coins can buy may fall if prices rise.
A shared unit of money also makes prices easier to compare. A shirt priced at twenty dollars costs twice as much as one priced at ten. Buyers can compare the prices without a separate negotiation about how many eggs each shirt is worth.
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Questions
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Question 1 of 4
What is this passage mainly about?
The answer is B: How money helps with exchange, saving value and comparing prices
The passage explains three uses of money through simple examples.
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Question 2 of 4
What advantage do coins have over fresh food as something to keep for later?
The answer is A: They do not spoil like fresh food.
Coins do not spoil. The passage adds that this does not guarantee unchanged purchasing power.
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Question 3 of 4
A shoemaker does not want eggs, but a baker does. How could money help the farmer buy shoes?
The answer is C: The farmer can sell eggs to the baker and use the payment for shoes.
Money separates selling from buying. The person who buys the eggs need not be the person who sells the shoes.
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Question 4 of 4
In this passage, "barter" means
The answer is D: trading goods directly for other goods
The first paragraph defines barter as direct exchange, illustrated by eggs offered for shoes.
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