Makes the world go round and comes in many forms, from shells and beads to gold coins to plastic or paper. It is better than barter in enabling an economy’s scarce resources to be allocated efficiently. Money has three main qualities:

• as a medium of exchange, buyers can give it to sellers to pay for goods and services;
• as a unit of account, it can be used to add up apples and oranges in some common value;
• as a store of value, it can be used to transfer purchasing power into the future. A farmer who exchanges fruit for money can spend that money in the future; if he holds on to his fruit it might rot and no longer be useful for paying for something. Inflation undermines the usefulness of money as a store of value, in particular, and also as a unit of account for comparing values at different points in time. Hyper-inflation may destroy confidence in a particular form of money even as a medium of exchange. Measures of liquidity describe how easily an asset can be exchanged for money (the easier this is, the more liquid is the asset).