ACC207 - INTRODUCTION TO MONEY AND BANKING
Money can be thought of as any good that is widely used or accepted in the transfer of goods and services. Today, there are three common forms of money in use. Commodity money is a good whose inherent value serves as the value of money – gold or silver being one good example. Fiat money is a good whose value is less than the value of money it represents – paper money, for instance. Bank money consists of accounting credits that can be drawn on by the depositor – checking accounts, for instance
Money serves multiple functions in an economy. Money is first and foremost a medium of exchange. When all parties in an economy will accept money, it eliminates the need for a double coincidence of wants that goes with barter – that is, both parties have to want what the other is offering. Accordingly, money as a medium of exchange is much faster and more convenient in commerce.
Money also is supposed to hold value over time. A dollar bill or gold coin will still be valuable tomorrow or a year from now, but a fish has very little value after a couple of days because of decomposition.
