The Dialog/Emil Jeyaratnam, CC BY-ND
That is the primary piece in Curious Youngsters, a brand new sequence geared toward kids. The Dialog is asking children to ship in questions they’d like an knowledgeable to reply. All questions are welcome – severe, bizarre or wacky! Electronic mail your query to firstname.lastname@example.org
The place does cash come from? – Millie, aged 5, Sydney.
In case you look inside your mother and father’ wallets, you’ll see some brightly colored plastic sheets and a few little plastic playing cards. These plastic notes and playing cards are “cash”, which your mother and father use to purchase meals, garments, and delightful toys.
Once I was a toddler, I used to learn The Adventures of Pinocchio. Pinocchio is a puppet who grew to become a toddler. He believed that cash grew on bushes. It took him a little bit of time to grasp that this isn’t true.
Cash doesn’t develop on bushes. Your mother and father need to work in a job to get it.
The plastic notes come from a spot known as the Federal Reserve Financial institution of Australia. You possibly can name it “the RBA” for brief.
The RBA is in Sydney. The individuals who work there function a machine that prints and cuts the yellow, pink, purple and blue plastic notes that you’ve seen in your mother and father’ wallets.
The nice folks on the RBA can print just about as many of those notes as they need. However they know that in the event that they print too many of those notes, then one thing not so good will occur. This not so good factor is named “inflation”. Let me clarify what which means.
When there are too many notes going round, folks begin to spend an increasing number of cash. As a result of there may be a lot cash going round, the folks in retailers begin charging extra for issues like meals and garments and delightful toys. Every thing begins to get costlier. That’s inflation.
So, whenever you hear your mother and father saying that “life is simply too costly”, you may blame it on inflation.
We haven’t at all times had cash like the cash you see immediately. Just a few thousand years in the past, folks wouldn’t purchase issues, they might swap. For instance, you may swap some greens out of your backyard along with your good friend to get some ham, for instance.
That labored for some time, however people finally determined it was simpler to make small notes and cash than to go round discovering shells, greens or salt to commerce, and that’s how the cash system was born.
The plastic playing cards inside your mother and father’ pockets are additionally cash. The colored plastic notes are stunning, however you may lose them, and it’s arduous to maintain all of them in your pockets in case you want loads of them to purchase a number of issues.
So, as an alternative of going round with loads of notes, folks put their notes in a spot known as a “financial institution”. The financial institution retains the notes protected for you and provides you a plastic card in return.
When your mother and father have to get some notes from the financial institution, they use this plastic card. They put the cardboard right into a machine, the machine reads the cardboard and is aware of that the proprietor of that card has notes within the financial institution. Then your mother and father inform the machine what number of of their notes they need again and the machine provides them the notes.
However there may be yet another shock: these plastic playing cards can be utilized to purchase issues immediately and pay subsequent month!
Your mother and father don’t even have to go to the shop with paper cash. They’ll go to the shop with their plastic card and present it to the store proprietor. The store proprietor will inform the financial institution that they’ve bought some issues. Subsequent month, the financial institution will ask your mother and father to pay for these issues utilizing their paper notes.
That’s why the plastic playing cards are mainly the identical as plastic cash.
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Fabrizio Carmignani receives funding from the Australian Analysis Council for a analysis on the estimation of the piecewise linear steady mannequin and its purposes in macroeconomics.