Unit 1 · Level 1 · What money is
Money is a story
Humans have used shells, salt, giant stones, gold, and now numbers on a screen as money. None of these work by magic. They work because everyone around you agrees to accept them. Money is a shared story: the moment enough people stop believing it, it stops being money.
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What you get asked
What actually makes something work as money?
Acceptance is the engine. Laws and gold can help build trust, but cigarettes worked as money in prison camps with neither.
Match each function of money to what it looks like in real life.
Good money does all three jobs at once. When inflation runs hot, the 'store of value' job is the first to break.
When a menu lists a pizza at €12, money is doing its job as a unit of ___.
Unit of account means money is the measuring stick we quote prices in, even before any cash changes hands.
Why did economies move from gold coins to paper and digital money?
Convenience won. Try paying rent in gold coins or sending them abroad. Paper, then digital entries, made trade vastly cheaper.
Modern 'fiat' money has value because…
'Fiat' means 'let it be done': no gold backing since the 1970s, just trust plus a state that accepts it for taxes. Fragile? A little. Powerful? Very. 🐜
The rest of this unit
Shells, paper, pixels: why money works at all, and who really creates it.