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reyemile eNotes educator| Certified Educator

Money is a medium of exchange.

Early economies functioned on a barter system. If you had sheep and needed grain, then you would look for someone who had grain and hope they needed sheep--or, if they needed something else, hope you could find someone else who had what they wanted and needed your sheep to organize a tripartite trade.

Needless to say, this was profoundly inefficient. 

Most societies discovered the usefulness of commoditized goods to facilitate trades. These were goods that were all roughly interchangeable; durable; and portable; meaning that they could be assigned a fixed value and exchanged easily. So your society might decide that everyone needs arrowheads; a sheep is worth three arrowheads; and a bag of grain is worth one arrowhead; and therefore, you can sell your sheep for arrowheads when they're ready to go to market and cash in those arrowheads whenever it's time to eat. Note that the desirability of the common good need not be due to its utility; precious metals, gems, and other scarcities can serve a similar purpose.

Money is the next step from that commodity good. Money is a good created by a central authority with the intent that it be scarce, desirable, and consistently valued. In olden times, this was accomplished by the governments guarantee that money could be exchanged for a fixed amount said rare commodities. But now, most currency values are set by fiat, with no backing other than collective faith that the monies' backers won't overproduce and destroy those currencies' rarity.

muthengiaaron | Student

Money is anything of value either a coin or a note printed by the central Bank that serves as a generally accepted medium of exchange,standard of value,unit of accounting measure and means to save or store purchasing power.Money is also used as the legal tender for settlement of debts.Money was introduced to replace barter trade system.Each country has its own currency which is regulated by the central bank of a particular country and used within the country.Money is simplified into various units of denominations to ease exchange of goods and services of different values.Each country defines how its money its money is simplified into variousdenominations.To facilitate international trade and exchange of products of different countries,monies of different countries are exchanged in which value of each currency is evaluated in the foreign exchange market to facilitate trade between countries with different currencies.

miminiwriter | Student

Money is the primary medium of exchange. We use it to trade what we have for what we don’t have or what we want. In business, money is basically a medium of exchange, an economic good and a means of economic calculation. Before money was invented, the people back then would trade and had their own means of exchange called barter trade. People would exchange what they had for what they didn’t have. This was however a daunting task as it was difficult at times to find someone who wanted exactly what you had and in a similar quantity. For example, if a farmer had milk and lacked grains, it doesn’t necessarily mean that his neighbor had grains. In fact, the neighbor might as well have milk and want something else like clothes. The issue of marketability and durability was also a factor in play since food, the main commodity was perishable. This gave rise to the need of people coming with a much better medium of exchange that could act as a medium. Things such as gold, iron, copper, cowrie shells were preferred since they didn’t rust or rot and with over time they became the preferred medium of exchange. In short, money should be scarce, durable, divisible, portable and proven to have value.