What is money

Although we all know what money is, providing a clear and precise definition of this term is not as easy as identifying it. In a simple way we can define the word money as banknotes and coins that we use to meet our payment obligations.

Historically the word money arises from the Latin word a.Name given to one of the silver coins minted at the time. The word money has been used to designate coins and bills in Spain since the Middle Ages. Money has its predecessor in what was formerly known as barter. With the appearance of money, a standard measure was introduced to avoid the difficulty that barter posed when representing the value of each transaction

In economic terms, money is everything that is used to be used by a society as a means of exchange and payment in exchange for a good, product, service or other type of obligation of payment. In addition and in economic terms, money to be considered as such, has to fulfill a series of functions.

Functions of money

There are several functions or characteristics that define money as we know it today.

  • Universal value. Its value and acceptance is known and recognized by all of society.
  • Unit of account. Money serves as a unit of measure to know and fix the price and the value of other things.
  • Preserved value. The value of money remains constant. Since the money that we know today represents a value. Therefore, there is no loss or depreciation over time.
  • Exchange medium. Money serves as a medium of exchange in exchange for other products or services.
  • Easy to use. Money must be easily transportable, manipulable and divisible.

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