Macroeconomics › Section N · Money and banking › Topic N.1
Defining money by its functions
Money is not defined by what it is made of but by the jobs it does. Seeing those jobs clearly explains why shells, metal coins, paper notes and numbers in a bank's computer have all counted as money at different times.
In this topic
- Money is defined by what it does
- Life without money: barter
- Worked example: counting prices under barter
- Function 1: a medium of exchange
- Functions 2 and 3: unit of account and store of value
- Function 4: a standard of deferred payment
- Worked example: which function is at work?
- What makes something good money
- Commodity money and commodity-backed money
- Fiat money
- Common mistakes to avoid
- Key takeaways
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