Money Is a Medium of Exchange


Money Is a Medium of Exchange


Money is defined in the Merriam Webster’s Collegiate Dictionary Tenth Addition as the amount of money paid or exchanged for something of value. Money has many uses in our society and economy and it can be used for a variety of reasons. Money can be a loan, it can be won through a contest, it can be stored in a bank account and it can be given to an employee or charity. In general, money represents power. The power to make choices. In the current economy with all the talk of recession, it seems like there is no way that most people will be able to save much money.


In a decentralized money system, money is the unit of exchange in which goods and services are exchanged among individuals, groups, communities and nations. Money is any tangible thing or legally accepted document that is normally accepted as payment for products and services and payment of debts, including taxes, from a specific nation or socio-cultural context. Money can be issued by governments, banks, public utilities or by private bodies such as corporations, labor unions, mutual companies, investment funds and even the owner of money. A variety of different currencies are used in this paper money system.


Money in circulation may be in the form of coins in bullion or it may be in the form of checks. Coins in circulation have to be evaluated periodically and then re-denounced. Governments typically buy back coins to maintain the supply of coins in the economy. Checks are liabilities on an individual or company’s account and are convertible into coins of legal tender. They are often used to facilitate trade and to monitor account balances.


Money has different uses according to each country. For instance, in the United States the money is used to purchase goods and to pay debts. Gold and foreign exchange reserves provide the United States with economic strength and protection from attack since they are a hedge against inflation.


Money is a medium of exchange, which can be used to purchase goods or to pay debts. In order for money to be considered as a medium of exchange, it should be a commonly held asset that is convertible into a definite quantity of goods at a definite date. Money, unlike stocks, bonds, commodities, coins or notes, is not designed to be traded away. There is a certain amount of risk involved in holding a currency due to interest rates fluctuations. It is also important to remember that all nations must protect their currencies against depreciation.


Money, unlike stock and bond markets, are designed to be flexible and market-determined money. Money acts as a medium of exchange in transactions between producers and consumers, businesses and sellers, producers and buyers, producers and suppliers and foreign and local governments and institutions. It is not designed to act as a vehicle for speculation or for the storage of wealth. There is a particular risk of inflation and a corresponding risk in exchange and credit terms. Money, like all other things in the market, will always have risks and premiums.


A number of alternative monetary instruments are available to the policyholder. It is possible to use banks and deposit accounts, government and non-government minted coins, credit cards, and debit cards. The most commonly used and the most convenient form of money are the coins and paper money normally kept in checking accounts.


Money is needed throughout the process of trade, and it is an important element in the operations of both the production and distribution of goods. With a currency there is a need for a central bank to control the supply of money in the market and to influence the interest rates. The central bank can either buy or sell back the currency based on the needs of the economy. Money is a very important part of the economic system.


No comments yet, be the first by filling the form.