Money

Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money.

Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money, like any check or note of debt, is without use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".

The money supply of a country consists of currency (banknotes and coins) and, depending on the particular definition used, one or more types of bank money (the balances held in checking accounts, savings accounts, and other types of bank accounts). Bank money, which consists only of records (mostly computerized in modern banking), forms by far the largest part of broad money in developed countries.

History

The use of barter, where goods and services are directly exchanged for other goods and services, has been used since time immemorial. However, barter is inefficient, as the coincidence of wants problem can be severe. Money provides a solution to this problem by acting as a universal medium of exchange.

Types of Money

There are several different types of money, including commodity money, representative money, fiat money, and cryptocurrency. Each type has its own unique features and uses.

Functions of Money

Money serves several key functions in an economy, including a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.

See Also

• Economics
• Finance
• Banking
• Cryptocurrency

References

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