Economics · Level 2 · 163 words

Why We Use Money

Original passage © Studio AM, written for Fluency.

Before money, people traded goods for goods. This is called barter. A farmer with eggs could trade them for shoes. But barter has a problem. The farmer must want shoes, and the shoemaker must want eggs at the same time. If the shoemaker wants bread instead, no trade happens.

Money solves this problem. Money is a thing that everyone agrees to accept. The farmer sells eggs for coins. Later he uses the coins to buy shoes. He does not need to find one person who wants exactly what he has.

Money also stores value. Eggs go bad in a week, so a farmer cannot save them. Coins do not go bad. He can hold them for a year and still buy something with them.

Money is also a way to measure. When every price is written in the same unit, people can compare a shirt and a chair in a second. Barter has no simple unit, so every trade needs a new negotiation.

Comprehension questions

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4 questions
1. What is this passage mainly about?

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B. Why money works better than trading goods for goods
Each paragraph names one job money does better than barter: it removes the matching problem, it stores value, and it gives one unit for prices.

2. According to the passage, why can a farmer not save eggs?

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A. Eggs go bad in a week.
The text says directly: "Eggs go bad in a week, so a farmer cannot save them."

3. The passage suggests that barter only works when

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C. each person wants what the other person has
The failed trade happens because the shoemaker wants bread, not eggs. So both sides must want each other's goods at the same time.

4. In this passage, "barter" means

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D. trading goods directly for other goods
The word is defined by the sentence before it: "people traded goods for goods. This is called barter."

Source: Written for Fluency. Original passage © Studio AM, written for Fluency.