Money – What is it?


Money – What is it?

Money is a general term that is used to describe any unit of currency that has no physical presence but is accepted as payment, in terms of goods and services, for particular goods and services in a specific political context or socio-economical context. Money is used to facilitate trade between parties. Money has many uses and functions. For instance, money is often used as a medium of exchange in situations where money will not be accepted or is not easy to obtain (such as in the case of scarcity of certain objects). Also, money facilitates transactions between individuals by transferring payment or trade between them directly. In order to make money a useful service, it is often transformed into a commodity or it is given as bank notes or other instruments of value that can be redeemed after a period of time.



There are many different types of money: the currency of a country that can be converted into another currency, the national currency that acts as legal tender for payment of debts, the money of a country that serves as a medium of exchange in situations where money would otherwise not be accepted, and the currency of a country that serves as a universal medium of payment for all purchases and transactions. A nation’s currency is typically derived from the money of that nation. A nation’s money thus enables its residents to purchase goods and services from other nations at a market price and denominate money owed to other nations in terms of this market price. It also enables citizens of a nation to redeem their debt at a fixed rate from other nations.


Money, as it appears in the narrower sense above, is a general use-value or commonly accepted medium of exchange in an economy. As noted, money is often converted from one form to another in order to facilitate trade and to facilitate payments between individuals. In addition, money may serve as a standard of deferred payment or as a guarantee of debt security.


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