A Money Explanation

Money makes the world go round and helps economies to thrive. Yet most of us know little about how or where it comes from and what gives it its value.

This article gelduitleg.nl of money and some of its key characteristics, as well as how it is measured. It also discusses the difference between money and currency – which are both important concepts that play distinctive roles in an economy.

A $20 bill tucked into a birthday card from your grandmother has the same purchase power as the money you carry in your wallet. This is because the bills, like all money, have three essential functions: they are mediums of exchange; stores of value; and units of account.

Understanding the Global Economy: Factors Affecting Money Supply and Demand

Historically, before the invention of money, most transactions were carried out through bartering. To trade something you own for another good or service, both parties must have something that the other party wants. This was often impossible to do, especially for large items such as houses and land or even food.

The main function of money is to enable people and businesses to trade goods and services without having to directly swap them. This enables the economy to grow more quickly than it could otherwise, because there is no need for two parties to coordinate their own goods and services to find a trade that is mutually beneficial.

To be money, an item must have the following qualities: durability, divisibility and transportability. Durability refers to an asset’s ability to withstand damage and decomposition over time, while divisibility means that the same amount of money can be divided into smaller parts without losing its value. Finally, transportability allows money to be easily moved around in a country – or even across the globe – to facilitate trades.