What is the Concept of Money?

Money is any item or verifiable record that is generally accepted as payment for goods and services and as repayment for debts, such as taxes, in a particular country of socio-economic context. The main functions of money are: (1) a medium of exchange, (2) a unit of value, (3) a store of value, and sometimes (4) as a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered money.

Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money, like any check or note of debt, is without use value as a physical commodity. Instead, it derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of a country "for all debts, public and private." Counterfeit money can cause good money to lose its value.

The money supply of a country consists of currency (banknotes or coins) and, depending on the definition used, one or more types of bank money (the balances held in checking accounts, savings accounts, and other types of bank accounts). Bank money, which consists only of records (mostly computerized in modern banking), forms by far the largest part of broad money in developed countries.

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