role of money

• Money

  Anything that is generally accepted as a means of payment for goods and services
• Money is a medium of exchange - anything that sets the standard of value of goods and services acceptable to all parties involved in a transaction
• Narrow definition of money

  Anything that is seen as money, declared by legal tender by the government of a country e.g. notes in circulation
• Spectrum of liquidity

  Shows how close money is to cash and therefore how easy to use as payment for goods & services or how liquid it is
• the spectrum of liquidity(most to least)

  • Cash
  • Current account
  • Savings account (depends on type - ISA more illiquid)
  • Shares
  • Machinery
  • Properties
• Money avoids the problems of barter, principally the double coincidence of wants, barter is inefficient and would suppress specialisation and the division of labour
• double coincidence of wants

  where two parties have goods they are both willing to exchange (in barter economy)

  (exchanges occur when both traders want something the other has)