14.1

currencies are dollar bills or other currencies with values backed up by gold or other items held at a bank.

Commodity-backed

Commodity money

Items that are used as money, but which also have value from their use as something other than money

Fiat money

Money that has no intrinsic value, but is declared by a government to be the legal tender of a country.

Bartering

Trading one good or service for another

Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. To serve this function, money must be very widely accepted as a method of payment in the markets for goods, labor, and financial capital.

medium of exchange

Money serves as a standard of deferred payment, which means that if money is usable today to make purchases, it must also be acceptable to make purchases today that will be paid in the future.

standard of deferred payment

Money serves as a _______________, which means that although money loses some buying power each year in an economy with inflation, it still remains money.

store of value

In an economy without money, a doctor who wishes to buy a pair of jeans needs to find a person who has a pair of jeans in the correct size and who is willing to exchange it for some hours of the doctor's service. This is an example of the problem of double coincidence of wants.

the problem of double coincidence of wants

Money serves as a unit of account, which means that it is the ruler by which other values are measured.

unit of account