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Money & Inflation: fun facts and quiz
The essentials in 7 ideas, with fun facts, an illustrated story and a quiz to see how much you know.
The essentials
What Money Is
Money is anything people agree to accept in exchange: shells, metal coins, paper notes or numbers in a bank account. It saves us from swapping goods directly.
Key fact
Most money today exists only as digital records.
A Short History of Money
The first coins were made in Lydia, in today’s Turkey, around 600 BCE. China was the first to use paper money, over 1,000 years ago.
Key fact
Marco Polo was amazed to see paper money in China.
Inflation
Inflation is when prices across the economy rise over time. If prices rise faster than your pay, your money buys less.
Key fact
Many central banks aim for about 2% inflation a year.
Central Banks
Central banks, like the European Central Bank or the US Federal Reserve, manage a country’s money. Raising interest rates is their main tool to cool inflation.
Key fact
The Bank of England, founded in 1694, is one of the oldest.
Hyperinflation
Hyperinflation is when prices spiral out of control. In Germany in 1923 and in Zimbabwe in 2008, money became almost worthless within months.
Key fact
Zimbabwe printed a 100 trillion dollar note in 2009.
Interest Rates
An interest rate is the price of borrowing money. When rates rise, loans cost more and saving pays more; when they fall, the reverse.
Key fact
Rates near zero were common after the 2008 financial crisis.
Digital Money
Card payments, phone wallets and banking apps have made cash rarer. Some central banks are testing digital currencies of their own.
Key fact
Sweden is one of the most cashless countries in the world.
Fun facts
In prisons and prisoner-of-war camps, cigarettes have often served as money.
The first coins, from Lydia, were made of electrum, a natural mix of gold and silver.
At its worst, in 2008, prices in Zimbabwe were doubling roughly every day.
The Bank of England’s vaults hold around 400,000 gold bars, much of it for other countries.
In 1923 Germany, some people burned banknotes because they were cheaper than firewood.
In the 2010s, some central banks set negative interest rates, in effect charging banks to hold their money.
In Kenya, M-Pesa, launched in 2007, lets millions of people send money by text message, no bank account needed.
Story: The Money at the Bottom of the Sea
The Money at the Bottom of the Sea
On the Pacific island of Yap, money came as huge stone discs, some taller than a person, carved from rock on islands hundreds of kilometres away.
The stones were too heavy to move, so when one changed hands, it usually stayed put. Everyone simply remembered who owned it.
One is said to lie at the bottom of the sea, lost from a canoe on the way home. It still counts as money: everyone agrees it exists.
True or false?
Tap your answer to see if you got it, and why.
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Question 1 of 10
Most money today exists as digital records, not cash.
Show the answer
True. Notes and coins are a small share.
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Question 2 of 10
China used paper money before Europe did.
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True. Centuries before.
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Question 3 of 10
If prices rise faster than your income, your income buys less.
Show the answer
True. Your money’s buying power shrinks.
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Question 4 of 10
Central banks raise interest rates to fight inflation.
Show the answer
True. Borrowing costs more, so spending cools.
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Question 5 of 10
In 1923 Germany, money lost almost all its value within months.
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True. Prices doubled every few days.
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Question 6 of 10
Higher interest rates make borrowing more expensive.
Show the answer
True. Mortgages and loans cost more.
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Question 7 of 10
Some central banks are testing digital currencies.
Show the answer
True. Like Sweden’s e-krona project.
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Question 8 of 10
Money has always been made of paper.
Show the answer
False. Shells, metal, beads and more came first.
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Question 9 of 10
Marco Polo brought paper money to China.
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False. China used it long before he arrived.
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Question 10 of 10
Inflation means every price rises by exactly the same amount.
Show the answer
False. Some prices rise faster, some slower, some fall.
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KnowSoda learns what you know and brings back what you’re about to forget. Money & Inflation has 6 more ideas at the Advanced and Expert levels.
Sources
- Bank of England — Knowledge bank: what is money, inflation, interest rates
- European Central Bank — Why price stability matters
- British Museum — Money gallery, the first coins of Lydia
- Encyclopaedia Britannica — hyperinflation, Zimbabwe, Weimar Germany
- Sveriges Riksbank — The e-krona and cash in Sweden
- Bank of England (2014), Money creation in the modern economy
- The Economist — The Big Mac index
- Reserve Bank of Australia — Polymer banknotes
