how money works
money is a liquid asset used to facilitate transactions of value it is used as a medium of exchange between individuals and entities it s also a store of value and a unit of account that can measure the value of other goods prior to the invention of money most economies relied on bartering where individuals would trade the goods they had directly for those that they needed this raised the problem of the double coincidence of wants a transaction could only take place if both participants had something that the other needed money eliminates this problem by acting as an intermediary good the first known forms of money were agricultural commodities such as grain or cattle these goods were in high demand and traders knew that they would be able to use or trade these goods again in the future cocoa beans cowrie shells and agricultural tools have also served as early forms of money 1as economies became more complex money was standardized into currencies this reduced transaction costs by making it easier to measure and compare value also the representations of money became increasingly abstract from precious metals and stamped coins to paper notes and in the modern era electronic records during world war ii cigarettes became a de facto currency for soldiers in prisoner of war camps the use of cigarettes as money made tobacco highly desirable even among soldiers who did not smoke 2