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13 May, 2015 - 12:50

Money is the medium of exchange. It is used as a standard of value in which all prices are expressed. It is also a store of value for future consumption. Various characteristics of money are desirable, such as divisibility and durability.

If no money were used, people would revert to barter, that is, exchange of items for other items. A farmer who would have an extra cow could exchange it for a horse, or two sheep, or a ton of apples, or a ton of eggs, for instance. Matching needs would have to exist: the one who had the eggs would have to want a cow. But the farmer may want a pound of eggs instead of a ton of eggs. Thus, without some asset chosen as money, transactions are difficult.