Banking · Video Lesson
The Main Functions of Money
Why do we use money at all? This lesson explains the four main functions of money — a medium of exchange, a store of value, a unit of account, and a standard for deferred payments — and why each one makes a modern economy work far better than barter.
For Teachers
Lesson at a glance
- Topic
- Banking & Economics
- Grade Level
- Grades 7–12
- Resource Type
- Video Lesson + Worksheet
- Estimated Time
- 45–60 minutes
- Format
- Class discussion + activity
- Materials
- Video, worksheet, whiteboard
What Students Learn
Learning objectives
- Define money as a medium of economic exchange
- Explain why barter is inefficient in a modern economy
- Describe the four main functions of money with an example of each
- Explain how inflation reduces money’s value as a store of value over time
- Connect the functions of money to everyday transactions
Video Lesson
Watch: The Main Functions of Money
Materials
What you’ll need
- Internet access for the video
- Printed copies of the worksheet (one per student)
- Whiteboard or projector for the barter activity
- Optional: index cards listing goods/services for a barter simulation
Key Terms
Vocabulary
- Money
- Anything widely accepted as final payment for goods, services, or debts.
- Barter
- Trading one good or service directly for another, without money.
- Medium of exchange
- Money’s role as the widely accepted thing people use to pay for goods and services.
- Store of value
- Money’s ability to hold worth over time so it can be saved and used later.
- Unit of account
- Money’s role as the common measure used to price and compare things.
- Standard of deferred payment
- Money’s ability to settle debts and future agreements.
- Inflation
- A general rise in prices over time, which lowers money’s purchasing power.
For Teachers
Lesson plan
Estimated time: one 45–60 minute class period.
Lesson sequence
- Hook — life without money (8 min). Run a quick barter scenario: a cook wants repair work from a mechanic who doesn’t want food. Why is trading hard without money?
- Watch the video (8 min). Play the lesson video. Ask students to note the four functions of money.
- The four functions (18 min). Work through each with examples: store of value (saving $50 for next week), unit of account (pricing in dollars instead of apples), medium of exchange (the cashier accepts your money), and standard of deferred payment (loans and future agreements). Note how inflation erodes the store-of-value function.
- Worksheet (8 min). Students complete the worksheet based on the video.
- Wrap-up (4 min). Students name one purchase they made recently and identify which functions of money it used.
Extension activity
- Barter simulation. Hand out cards with goods/services students “have” and “want,” then have them try to trade. Debrief on why money would make it easier.
Assessment
Assess participation in the discussion and simulation and the completed worksheet.
Discussion
Discussion questions
- Why is barter difficult in an economy with thousands of different jobs and goods?
- Which of the four functions of money do you use most in a typical week?
- How does inflation weaken money’s role as a store of value?
- Why does money only work if it is widely accepted?
- Could something other than government money serve these functions? Give an example.
Printable Worksheet
Main Functions of Money — Student Worksheet
Short-answer worksheet based on the video for students to complete and discuss.
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