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Money Supply

different types of money

3 Types of Money

Money is a medium of exchange. It allows two people to trade without needing what the other wants. This can come in all types and forms. So long as people trust and accept a certain form of money; it can be used as a medium of exchange. For example, gold was historically used as a form of monies. Farmers would go to market and sell their cows in exchange for a certain amount of gold. This gold could then be exchanged by the farmer for a loaf of bread from the baker.

Commodity Money Definition

Commodity Money Definition

We can define Commodity money as a physical good that consumers universally use to trade for other goods. In other words, it is like the money we use today, but has an actual value.

Fiat Money Definition

Fiat Money Definition

Fiat money is a currency without any underlying value, but which value is derived by government. In other words, it is a form of currency that only holds value because of government enforcement.