This is about a child who is asking his father about the economy.
Dad, I was wondering... why do we have money? Couldn't we just trade to get what we want?
Good question, son. First of all, money is used to pay goods and services like the food we eat and the clothes that we wear, right? Back in the ancient times, people did trade for goods and services, but some people didn't have anything to trade with, so something valuable like shells were used as payment.
Yep... trading was a good way to pay for goods and services, but if you needed something from someone else but you couldn't give them anything to trade, then it wouldn't be as efficient.
So that's how using money started?
No problem son, thanks for asking!
In the US economy, money has three uses: a medium of exchange, a store of value, and a measure of value. Money makes trade easier, makes saving and investing easier, and makes comparing the value of goods easier. Currency Money has value because we give it value; we trust in the government, who is the one issuing currency. If we didn't trust the government, money would be worthless pieces of paper.
But dad, how does money work in the economy?
Ohh... so money gets its value since people trust the government... I get it now, thanks dad!