Money

What is money?

Very technically speaking, money could be any material thing. It is an object that has been assigned a particular value that may be used for the repayment of debts, the purchase of items, or a simple way of accounting for ones’ contributions to the workforce.

Early forms of money were based on objects of actual material worth in and of themselves. That is to say that the earliest forms of money were commodities that were desired beyond the monetary value that they had been assigned. In the modern day, we have moved on to what is known as fiat currency. This is money that has no real value by itself but is assigned value as legal tender by a government.

The amount of money in a country, also known as the money supply, is the amount that is available in currency (coins and paper money) and bank deposits. Bank deposits are simply the amount of money that is currently being held in the savings and checking accounts of the citizens of a country.

Money serves three main functions. It is intended to store value, be used as a medium of exchange, and a unit of account. Those who save their money are using the storing value aspect of money. Those that are in the process of spending money are using it as a medium of exchange. We all are using it as a unit of account at all times. This fact is unavoidable. It is also unavoidable to not do all three functions at some point in life. Money is transferred from one person or institution to another constantly.

Money is known for its market liquidity. This is the fact that this is the most easily traded object. Based on the fact that money is recognized by governments as having value, one can trade their money for a good or service quite easily. It eliminates the need for two individuals to barter with one another. One simply gives the other the money for the good or service provided. The one with the money is now able to use their newly obtained money to get goods or services of their own when they choose.