In common parlance, “money” refers to any commodity or means of exchange that individuals will take in return for the provision of goods and services, as well as the settlement of debts. The circulation of money is what keeps the world turning. Money is essential to the functioning of an economy because it enables transactions and fuels economic expansion. In most cases, economists are the ones that define money, as well as where it originates from and how much it is worth. The many facets of money are outlined in the following paragraphs.

Focus Points

Money is a means of trade, and it enables individuals and organizations to acquire what they need to survive and prosper in their respective environments.

1. Before the invention of money, one method that people traded one product for another was via the practice of bartering.

2. Money, like gold and other precious metals, has value because, to the vast majority of people, it stands for something of significant worth.

Did you know Rhodium is the most precious metal, Gold is actually 3rd. 

3. Fiat money is a currency that is issued by the government but is not backed by a tangible product but rather by the stability of the government that issued the currency.

4. First and foremost, money is a unit of account, which is a generally acknowledged and used standard unit to price various goods.

There Are Three Primary Schools Of Thought On Where Money First Came From:

A. Commerce was the original motivation for the production of money;
B. The concept of money was developed for societal reasons.
C. The concept of money originated from religious motivations.

Since the days of trading in shells and skins, money has undergone significant transformations, but its primary purpose has remained mostly the same. Money, in whatever form it may exist, serves as a medium of exchange for goods and services and makes it possible for the economy to expand by facilitating the completion of transactions at higher rates of speed.