What is money?

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rrteacher | College Teacher | (Level 2) Educator Emeritus

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The classic definition, taken from the Oxford Dictionary of Economics, is that money is a medium of exchange and a store of value. "Medium of exchange" means that money can be traded for other things, in other words, that other people recognize its worth. "Store of value" means that it can be put away and traded for other things in the future, and that it will, with some fluctuations aside, hold its value. This is perhaps not the place for a history of money, but it is important to say that money has progressed over time from items that had intrinsic value to items that have value because of the backing of a government, known as fiat money. This is a huge change, because it basically makes credit possible, which is the foundation of modern commerce.

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