Money is a medium of trade that enables individuals to obtain the goods and services they require to live. A monetary unit is a socially acknowledged standard unit of account that is used to price items. Money, like gold and other precious metals, has value because it represents something important to the majority of people.
Money-Key Points
- Fiat money is government-issued money that is backed by the stability of the issuing government rather than a tangible commodity.
- Money is a commodity that is widely acknowledged as a means of economic exchange.
- It is the medium through which prices and values are conveyed; it travels anonymously from person to person and country to country, allowing trade; and it serves as the primary measure of wealth.
- Commodity money is made up of items that have worth both in and out of their usage as money. Gold, for example, has been used as money throughout history, albeit it is now appreciated for its various qualities rather than its use as money.
- Commodity money has mostly been replaced by fiat money in most countries. Fiat money is good with a lower value than the money value it represents. Dollar notes are fiat money because their value as printed paper is less than their worth as money.
- The book credit that banks issue to their depositors is known as bank money. The use of bank money is involved in transactions involving checks drawn on bank deposits.