Understanding the Dollar (1953)

[Music] understanding the dollar that means more than knowing what a dollar bill looks like or what a silver dollar is to understand the dollar we must know something about the human story of the dollar in the everyday business of living something of the functions and the value of the dollar oh good morning Mr bla how are you this morning miss mu I'm fine I was in the kitchen I didn't hear you come down the stairs I'm in a hurry I have to be early to school today but I thought I'd leave you the rent check oh thank you uhhuh how's water this morning all right we are familiar with the story of how money makes possible the exchange of many different goods and services among many different people for his service as a teacher in the local High School Mr Blaine earns money in exchange for money he is able to obtain the use of the upstairs of Mrs Mueller's house for him himself and his family wherever we go we see money being used as a medium of exchange money allows a businessman to exchange part of his profit from his business for a daily paper money is a convenient method of exchanging many different kinds of goods and services among many persons money is also a standard of value the value of goods is stated in terms of money the auto dealer could not possibly State the price of a car as so many hours work for this Carpenter nor could he State the price as so many bushels of wheat from this farmer but a price in dollars is clear to each person money is a standard of value we can think of other purposes money serves the farmer has just sold this year's crop of wheat he has enough money to buy all his needs for the year to come but it is more convenient for him to keep the money now storing up purchasing power so that he can buy goods and services later as he needs them money in the bank is not actually wealth it is a means of storing up purchasing power that can be used later to obtain wealth we have covered part of the story of understanding the dollar but there is more there is also the story of the value of the dollar which may decrease how does this happen why does the value of the dollar decrease and increase that is the story of comparative prices prices change demand and Supply government controls subsidies many things affect prices but another way to talk about price changes is to consider the value of the dollar now let's say that $1 will buy five cans of soup we can think of the value of a dollar as five cans of soup another day if a dollar will buy only four cans its value has gone down when it will buy six cans the value of the dollar has gone up up thus the price of soup determines the value of a dollar in respect to soup as the price goes up what the dollar will buy Goes Down And as the price goes down what the dollar will buy goes up so we say the value of the dollar is inversely related to prices now of course the price of soup is only one price the day the price of soup goes down the price of sugar may go up but sometimes the prices of many things move upward or downward at the same time so when we talk about the value of the dollar we usually mean not the price of one article but the prices of many articles we're talking about just general price levels as the general price level goes up the value of the dollar goes down as the general price level goes down the value of the dollar goes up but the changing value of the dollar has a human story too notice the Furnishings of Mrs Mueller's home they're old but this is in part because she likes them but also because of the changing value of the dollar Mrs Mueller is a widow her income in dollars has remained about the same for the last 10 years she has money from a pension and from the rent of the upstairs of her home because prices have increased her dollars have declined in value her situation is typical of what we call a fixed income with her income she can buy less in times of general price increases now the carpenter is a wage earner he depends on this old car to get him to work why such an old car well he wanted a new one some time ago but Rising prices put a new car out of his reach since then however his wages have increased today he can plan seriously toward buying a new car but remember prices went up first wages followed later this is called a wage lag it is typical of wages in times of price increases what about Mr Blaine the school teacher his income has increased some but not much the wage lag for people on salary is often great salaries do not increase as rapidly as prices and Mr Blaine finds that he must work on another job part-time in order to live at the same level as before what about the profits of businessmen how do Rising prices affect this type of income Mr Samson is in the business of making scales in his store room there are stocks of raw materials his company has purchased for use these raw materials were purchased some time ago at a time when prices were lower but the goods being manufactured will be sold at the present higher prices so Rising prices often mean increased profits to businessmen in our story of understanding the dollar we have seen that money is a medium of exchange it is a standard of value and it is a way of storing up purchasing power the value of the dollar changes in inverse relation to prices and we have seen some some of the effects of generally Rising prices on people with various types of income now a question for you to think about and discuss when prices go down when the value of the dollar goes up then how are these people with various types of income affected you continue the story of understanding the dollar [Music]