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The Functions of Money; The Kinds of Money definitions

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  • Medium of Exchange
    Asset accepted by all parties for trading goods and services, removing the need for direct barter.
  • Unit of Account
    Standard measure that assigns consistent prices to goods, simplifying value comparisons and calculations.
  • Store of Value
    Ability to retain purchasing power over time, allowing deferred spending and saving for future needs.
  • Double Coincidence of Wants
    Situation in barter where both parties must have what the other desires for a trade to occur.
  • Barter Economy
    System where goods and services are exchanged directly without a universally accepted medium.
  • Liquidity
    Ease with which an asset can be quickly converted into cash for immediate use in transactions.
  • Fiat Money
    Currency with value established by government decree, lacking intrinsic worth or alternative uses.
  • Commodity Money
    Medium with intrinsic value and alternative uses, such as gold, beyond facilitating transactions.
  • Legal Tender
    Form of payment recognized by law as valid for settling debts and fulfilling financial obligations.
  • Standard for Deferred Payment
    Function enabling future payments, such as loans, with confidence in value retention over time.
  • Asset
    Resource with economic value, including items like stocks, bonds, or real estate, not always usable as money.
  • Purchasing Power
    Capacity of money to buy goods and services, reflecting its real value in the economy.
  • Intrinsic Value
    Inherent worth of an item, independent of its use as a medium of exchange.