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 and the everyday business of living something of the function and the value of the dollar 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 miller's house for himself and his family wherever we go we see money being used as a medium of exchange money allows the businessman to exchange part of his profits from his business for a daily paper money is a convenient method of exchanging many different kinds of goods and services i'm mung many persons money is also a standard a value the value of goods is stated in terms of money to each person money is a standard of venue and we can think of other purposes money serves the farmer has just sold this year's crop of wheat he has and the 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 the money in the bank is not actually well it is a means of storing up purchasing power that can be used later to obtain well 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 and let's say that one dollar 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 when it will buy six cans the value of the dollar has gone up thus the price of soup determines the value of a dollar in respect to soup as the price goes up but 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 that 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 money we are talking about general price level 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 to notice the furnishings of mrs mueller's home there oh so this is in part because she wants them but also because of the changing value of the dollar mrs miller is a widow her income in dollars has remained about the same for the last ten years she has money from a pension and from the rent of the up stairs 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 carpenter is a wage earner he depends on this old car to get him to work by 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 wage lag it is typical of wages in times of price increases what about mr blaine the schoolteacher 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 price 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 businessman how the rising prices affect this type of income mr sampson is on the business of making scale and his store own there are stocks of raw materials his company has purchased for us 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 price so rising prices often mean increased profits to businessm and 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 of the effects of generally rising prices on people with various types of income no 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