A High School Economics Guide

Supplementary resources for high school students

Definitions and Basics

Scrooge McDuck & Money. In this animated short from the Walt Disney Company, Uncle Scrooge discusses the history or money and the importance of money in the overall economy. At Economics Media Library.

https://youtu.be/DWTjJZxS64Y

 

What is Money? Why Does It Have Value? In this EconEdLink lesson, students will learn about the history of money and its 5 characteristics.

Functions of Money, at Khan Academy.

Money Supply, from the Concise Encyclopedia of Economics

The U.S. money supply comprises currency—dollar bills and coins issued by the Federal Reserve System and the Treasury—and various kinds of deposits held by the public at commercial banks and other depository institutions such as savings and loans and credit unions….

Price Level, at Investopedia

A price level is the average of current prices across the entire spectrum of goods and services produced in the economy. In a more general sense, price level refers to any static picture of the price of a given good, service, or tradable security….

The Story of Money, at the Federal Reserve Bank of Atlanta.

Guided online edition of museum exhibit.

In the News and Examples

The Economics of Bitcoin, by Robert P. Murphy at Econlib.

Bitcoin is an ingenious peer-to-peer “virtual” or “digital currency” that challenges the way economists have traditionally thought about money. Its inbuilt scarcity provides an assurance of purchasing power arguably safer than any other system yet conceived.

Milton Friedman on Money, EconTalk podcast episode

Russ Roberts talks with Milton Friedman about his research and views on inflation, the Federal Reserve, Alan Greenspan and Ben Bernanke, and what the future holds….

Owen on Parenting, Money, and the First National Bank of Dad, EconTalk episode.

David Owen, author of The First National Bank of Dad, talks with EconTalk host Russ Roberts about how to educate our children about money and finance. Owen explains how he created his own savings accounts for his kids that gave them an incentive to save and other ways to teach them about postponing gratification, investing, keeping money in perspective and other life lessons. The conversation closes with a discussion of the value of reading to your kids.

Gold Standard, from the Concise Encyclopedia of Economics

The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price….

A Little History: Primary Sources and References

Of Money, by David Hume

MONEY is not, properly speaking, one of the subjects of commerce; but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade: It is the oil which renders the motion of the wheels more smooth and easy….

A lesson to accompany “Benjamin Franklin and the Birth of a Paper Money Economy, from the Federal Reserve Bank of Philadelphia.

In this lesson students learn about the role of money in the colonial economy by participating in a trading activity in which they observe the effects of too little money on trade within a colony. They learn about the difficulties associated with barter and the characteristics and functions of money. They read the booklet “Benjamin Franklin and the Birth of a Paper Money Economy” to learn about Benjamin Franklin’s role in shaping our understanding of the role of money in the economy. The students participate in an activity to learn more about how a land bank would work. In the final activity, students learn how too much money can lead to inflation.

Barter, Chapter I of Money and the Mechanism of Exchange, by William Stanley Jevons

The first difficulty in barter is to find two persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting, and many possessing those things wanted; but to allow of an act of barter, there must be a double coincidence, which will rarely happen. A hunter having returned from a successful chase has plenty of game, and may want arms and ammunition to renew the chase. But those who have arms may happen to be well supplied with game, so that no direct exchange is possible. In civilized society the owner of a house may find it unsuitable, and may have his eye upon another house exactly fitted to his needs. But even if the owner of this second house wishes to part with it at all, it is exceedingly unlikely that he will exactly reciprocate the feelings of the first owner, and wish to barter houses. Sellers and purchasers can only be made to fit by the use of some commodity, some marchandise banale, as the French call it, which all are willing to receive for a time, so that what is obtained by sale in one case, may be used in purchase in another. This common commodity is called a medium, of exchange, because it forms a third or intermediate term in all acts of commerce….

Modeling Money, by Robert P. Murphy at Econlib.

Non-economists often think that “economists study money.” The reality, though, is that most academic economists hardly think about money at all…This awkward situation underlines the chasm between “micro” and “macro” economics and shows that economists do not agree on the actual role that money plays in the real-world economy. There are two main approaches to dealing with money in economic analysis, each having strengths and weaknesses.

Where does money come from? Two schools of thought, by Alexander Salter at Learn Liberty.

The first school of thought, held by most economists and derived from Carl Menger’s classic article “The Origins of Money”, is that money is an emergent outcome of a series of exchanges. In any community where goods are exchanged, we would expect some individuals to specialize in producing goods that are relatively more saleable than others, i.e., those that are easier to exchange for what they finally want to consume…The other school, sometimes called the chartalist school, holds that the state (or rather, political power) is the essential feature that gives rise to money.

Where does money come from? Two schools of thought (part ii), by Alexander Salter at Learn Liberty.

The spontaneous order theorists argue money emerges from a process of exchange. The chartalists argue money arises due to the coercive imposition of debt obligations (political power). Which school is right?

 

Advanced Resources

Money and Inflation lesson, from the Foundation for Teaching Economics.

​In this lesson students learn that anything that performs the functions of money can be money (even macaroni!).  As they use their macaroni to bid on items during an auction, they learn that the value of money depends on the quantity of money relative to the quantity of goods and services they can buy with that money.   Historical and contemporary examples as well as video clips help students understand the role that banks and the Federal Reserve  play in expanding and contracting the money supply.

The Paradox of Money, by Pedro Schwartz at Econlib.

Let me state from the very beginning the paradox of money: that money, one of the greatest instruments of individual freedom ever invented by man should have become an instrument of political exploitation in the hands of government. The effects of this abuse go further than upsetting the financial equilibrium of market economies and reducing their productive progress. It undermines the whole philosophy of liberty.

Purchasing Power of Money as Related to the Equation of Exchange, by Irving Fisher, Chapter 2 from The Purchasing Power of Money

The Function of Money, Chapter I of The Theory of Money and Credit, by Ludwig von Mises

Where the free exchange of goods and services is unknown, money is not wanted. In a state of society in which the division of labor was a purely domestic matter and production and consumption were consummated within the single household it would be just as useless as it would be for an isolated man. But even in an economic order based on division of labor, money would still be unnecessary if the means of production were socialized, the control of production and the distribution of the finished product were in the hands of a central body, and individuals were not allowed to exchange the consumption goods allotted to them for the consumption goods allotted to others….

Vera Smith: The Contrarian View, by Leonidas Zelmanovitz at Econlib.

With this book, Vera Smith seems to be saying, no, Mr. Keynes, the policies you are suggesting are not new, they are not necessary to solve the problems they are purported to solve; most likely, they are part of the cause of the problem. Furthermore, there is an alternative, and that alternative is free banking.

That money does not need to be monopolistically produced or to have its supply regulated by the state can be attested by the fact that money monopolistically produced in one jurisdiction may be used voluntarily by the economic agents in other jurisdictions, as has been the case for millennia. Since the historical evidence demonstrates that the government’s monopoly on money production is not a necessary condition to have a medium of exchange available to the economic agents to facilitate their indirect transactions, that should be discarded as the reason for such a monopoly.

Of the Value of Money, as dependent on Demand and Supply, in Principles of Political Economy with some of their Applications to Social Philosophy, by John Stuart Mill.

The value of a thing is what it will exchange for: the value of money, is what money will exchange for; the purchasing power of money. If prices are low, money will buy much of other things, and is of high value; if prices are high, it will buy little of other things, and is of low value. The value of money is inversely as general prices: falling as they rise, and rising as they fall.

The History of Bimetallism in the United States, by J. Laurence Laughlin

The conflicting opinions of the day in regard to the adoption of bimetallism by the United States, and the disregard of the facts within our own experience, make it desirable that these facts should be investigated historically, and the results presented in a simple form for general use. Monetary science, moreover, will gain by any honest attempt to collect accurate data which may serve in the process of verification of economic principles, enabling us either to confirm the truth of previous conclusions, or to demonstrate their divergence from actual facts….

Related Topics

Real vs. Nominal

Monetary Policy and the Federal Reserve

Inflation

Foreign Currency Markets and Exchange Rates

Money Management and Budgeting