Money, as it exists in a modern monetary system, is a social construct that serves primarily as a
medium of exchange (means of payment). Money also serves other purposes, but we will focus
primarily on its most basic and common function. As a social species we exchange goods and
services via the use of this tool. Throughout history many things have served as money and still
do serve as money. But certain forms of money can be thought of as having a higher
“moneyness” than other forms of money within a particular society. In general, that which is
most readily accepted as a means of final payment can be thought of as having the highest level
of moneyness.
• Fiat money: A form of money that is widely accepted due to government law.
• Unit of account: A standard monetary unit for measurement of value of goods, services
and financial assets. In the USA the unit of account is the US Dollar.
• Medium of exchange: A widely accepted intermediary instrument that facilitates the
sale, purchase or trade of goods/services.
medium of exchange (means of payment). Money also serves other purposes, but we will focus
primarily on its most basic and common function. As a social species we exchange goods and
services via the use of this tool. Throughout history many things have served as money and still
do serve as money. But certain forms of money can be thought of as having a higher
“moneyness” than other forms of money within a particular society. In general, that which is
most readily accepted as a means of final payment can be thought of as having the highest level
of moneyness.
• Fiat money: A form of money that is widely accepted due to government law.
• Unit of account: A standard monetary unit for measurement of value of goods, services
and financial assets. In the USA the unit of account is the US Dollar.
• Medium of exchange: A widely accepted intermediary instrument that facilitates the
sale, purchase or trade of goods/services.
The most prominent form of modern money is fiat money. That is, money that exists due to legal
mandate. All fiat money is a specific legally mandated unit of account. These forms of money
have no intrinsic value. That is, this money is not necessarily a physical “thing”. In the USA, the
US Dollar is the legally mandated form of money that we use as a medium of exchange and unit
of account
mandate. All fiat money is a specific legally mandated unit of account. These forms of money
have no intrinsic value. That is, this money is not necessarily a physical “thing”. In the USA, the
US Dollar is the legally mandated form of money that we use as a medium of exchange and unit
of account
The US government determines the US Dollar as the denomination of money in the
USA and oversees the regulation of the use of dollars within the US payments system. The actual
money in this system can take many forms with varying levels of “moneyness”, but only the
denomination of US Dollar applies to the specific US monetary system as the unit of account.
USA and oversees the regulation of the use of dollars within the US payments system. The actual
money in this system can take many forms with varying levels of “moneyness”, but only the
denomination of US Dollar applies to the specific US monetary system as the unit of account.
“Money” is a vague term. Technically, anything can serve as money. And historically, many
things have served as “money”. As a social construct “money” is really nothing more than a tool
that helps us interact in our everyday lives. The history of “money” is lost in time, but there is
ample evidence of forms of monetary systems in primitive monkeys in which sexual favors are
traded in exchange for protection, grooming and other “bonds”. These primitive societies use
forms of money in exchanges as a form of social bond that interlinks the species in the attainment
of survival. In a primitive society money is essentially an unspoken bond. In a modern economy
money takes a more structured and institutionalized form.
It is best to think of “money” as being the social tool with which we primarily exchange goods
and services. Money has its highest level of “moneyness” when it is widely accepted as a final
means of payment for goods and services. Of course, money is more than merely a medium of
exchange, but its primary purpose for existence and most prominent use is in exchanges for goods
and services. Throughout history, many things have served this purpose and in modern
transactions many different instruments can be classified as “money”.
If we consider something that serves as a means of payment as “money” then “money” can be
different things to different people. For instance, in your local pawn shop gold might be
considered a form of money since it might be one of the few things that the shop owner will
accept as a medium of exchange. If you buy a sandwich from a shop that does not accept credit
cards they do not consider bank deposits to be “money”, but instead prefer cash bills.more
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