chapter  2
16 Pages

The history of money and finance

Money serves three important roles in an economy. It is a unit of account, a medium of exchange, and a store of value. As a medium of exchange, money avoids barter of one good for another. Barter, where individuals trade goods, requires a double coincidence of wants. You have a bicycle, but want an i-Pod, and someone you run into in the market has an i-Pod and wants a bicycle. When you meet by coincidence, you will exchange the goods. This is called barter, countertrade, or bilateral clearing: trade without a medium of exchange.