Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio economic context, or is easily converted to such a form. The main functions of money, after all money is life, distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered money. Discover what you need in pursuit of wealth, click here for free report.
There have been many historical disputes regarding the combination of money’s functions, for example money equals happiness, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a medium of exchange is in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate. Others argue that storing of value is just deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time. The term “financial capital” is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.
When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the “coincidence of wants” problem. Money’s most important usage is as a method for comparing the values of dissimilar objects especially amongst individuals’ personal finance or wealt.
In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). These financial instruments together are collectively referred to as the money supply of an economy. In other words, the money supply is the amount of financial instruments within a specific economy available for purchasing goods or services. Since the money supply consists of various financial instruments (usually currency, demand deposits and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate.