Money is a term that most people are familiar with, including the common use of the word in daily life. Money is any verifiable document or usually accepted payment for products and/or services and settlement of liabilities, including taxes, in a certain country or socio-cultural context. It is often used in international business and transactions. In the United States, money is always defined as “any of the various articles of value that are accepted as legal tender in payment of money.”
Money is also called “notes,” “bills of exchange,” ” drafts,” “coins,” “certificates of deposit,” “pieces of issued gold or silver” and “bartering checks.” Money in the form of coins and paper money are in circulation throughout the world. People use coins and paper money to buy food, consumables and services. Paper money, in the form of bills, is widely used to make payments for goods purchased internationally.
Business enterprises often extend credit, and it is this credit that acts as the source of money. Money is extended by a creditor by way of a promissory note, which is a legal agreement establishing that a borrower will repay a loan on a specified date. The money will be transferred to the borrower’s account, which he must then use to purchase goods or raw materials on credit.
As mentioned, MONEY circulates throughout the world. One example of money is a gold coin. Gold coin purchases are not only made between individuals but are extended among nations as well. Gold bars are another example of money. Gold bars are used as money, because they are a form of commodity that can be bartered for different goods, including goods that cannot be bought with coins. The price of gold per ounce is rising, and people all over the world are hoarding gold bars as a means to acquire wealth.
The third type of currency is a currency that is used as a global trade medium. A good example of such a global commodity money is the U.S. dollar. The U.S. dollar is accepted everywhere in the world and is accepted as legal tender for debts of all kinds. One of the most important functions of currency is as a unit of exchange, meaning that it is used to convert one type of goods into another. This is done when a buyer purchases goods from a seller on credit and wishes to convert those goods into cash, for example, a merchant can give his customer in United States dollars in exchange for his item of goods.
The fourth type of money, which is not a commodity, is called barter. Barter exchanges are normally used as a method of exchange when two or more parties wish to buy or sell goods, but because bartering involves money, it is sometimes used as legal tender. The principle behind bartering is that two or more persons from different locations agree to trade commodities, goods, or services for a fixed price, and then pay for these transactions with cash. The most popular example of bartering is that between a shopkeeper and a buyer who may have several goods for sale.