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In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. [1] In modern economies, the most commonly used medium of exchange is currency. Most forms of money are categorised as mediums of exchange, including commodity money, representative money, cryptocurrency, and most commonly fiat money.
In Money and the Mechanism of Exchange (1875), William Stanley Jevons famously analyzed money in terms of four functions: a medium of exchange, a common measure of value (or unit of account), a standard of value (or standard of deferred payment), and a store of value. By 1919, Jevons's four functions of money were summarized in the couplet:
Monetary economics is the branch of economics that studies the different theories of money: it provides a framework for analyzing money and considers its functions ( as medium of exchange, store of value, and unit of account), and it considers how money can gain acceptance purely because of its convenience as a public good. [1]
A currency [a] is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. [1] [2] A more general definition is that a currency is a system of money in common use within a specific environment over time, especially for people in a nation state. [3]
The other functions are the medium of exchange, which is used as an intermediary to avoid the inconveniences of the coincidence of wants, and the unit of account, which allows the value of various goods, services, assets and liabilities to be rendered in multiples of the same unit.
Traders generally negotiate through a medium of credit or exchange, such as money. Though some economists characterize barter (i.e. trading things without the use of money [1]) as an early form of trade, money was invented before written history began. Consequently, any story of how money first developed is mostly based on conjecture and ...
Money was invented before written history began. [1] [2] Consequently, any story of how money first developed is mostly based on conjecture and logical inference.A significant amount of evidence establishes that many things were traded in ancient markets that could be described as a medium of exchange.
"Money is a matter of functions four: a medium, a measure, a standard and a store." However, many newer texts do not distinguish the function of a standard of deferred payment, subsuming it in other functions. [7] [8] [9] Being a standard of deferred payment is one of the functions of money; it is distinct from: The standard of deferred payment ...