barter
a system relying on trade as opposed to money
circulation
the circular movement of currency, cash money, within an economic system
currency
he form of money, such as paper bills or coins, within a financial or economic system
exchange
to trade goods and services
liquidity
the ability to quickly convert to cash
money
a type of currency with value that is used to exchange for goods and services
- Replaces the need to barter
- Allows citizens to have a portable measure of value
In hand:
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In accounts:
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Types of money
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Commodity money has value because it is made with a valuable object.
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Representative money has value because it can be exchanged for a valuable good.
- Allows currency to be traded for a commodity such as gold or silver
- Was used in systems involving a "gold standard" or "silver standard
Fiat money has its value guaranteed by a government.
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Each nation's currency has a changing value relative to other currencies.
- This is referred to as a currency's exchange rate.
- This value changes based on many factors.