Gelduitleg makes the world go around, as they say, and most people have handled it at some point in their lives. But it can be challenging to understand exactly what money is and how it works.
In this article, we’ll take a look at the definition of Money and its three primary functions: medium of exchange, store of value, and unit of account. We’ll also discuss the four characteristics of money: durability, divisibility, transportability, and non-counterfeitability.
Money is any good or service that people agree to accept as payment for goods and services, or for the repayment of loans, in a given society or economic context. The key to defining money is its acceptance as a medium of exchange, which requires that it be (1) widely accepted, (2) convenient to carry and (3) easily recognized as having a universally recognized and stable value. Historically, many different things have been used as money—cowry shells, barley, peppercorns and even gold have all served this purpose.
The Power of Money: How It Shapes Our Lives and Society
Modern economies use money to facilitate trade, as a means of keeping track of the values of various combinations and quantities of goods and services, and to enable rapid transactions with little or no friction. Money comes in a variety of forms, such as coins and banknotes. We’ll focus on the former in this Explainer because it is, in fact, currency that provides most of the value we know as money. The growth in the number of Australian banknotes in circulation is a reflection of the increasing demand for cash among people and businesses.
