![]() The person can sell the surplus item for general purchasing power-that is, “money”-to anyone who wants to buy it and then use the proceeds to buy the desired item from anyone who wants to sell it. ![]() If a person has something to sell and wants something else in return, the use of money avoids the need to search for someone able and willing to make the desired exchange of items. That requires much more information about the buyer and imposes costs of information and verification that the use of money avoids. In principle, credit could perform this function, but, before extending credit, the seller would want to know about the prospects of repayment. The basic function of money is to enable buying to be separated from selling, thus permitting trade to take place without the so-called double coincidence of barter. Furthermore, the country’s residents accept the dollar as a medium of exchange because it is well-known and offers more stable purchasing power than local money. dollar, because the dollar has more stable value than the local currency. In many countries with a history of high inflation, such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the U.S. New money may substitute for old under less extreme conditions. If the social arrangement that sustains money as a medium of exchange breaks down, people will then seek substitutes-like the cigarettes and cognac that for a time served as the medium of exchange in Germany after World War II. When great increases occur in the quantity of these pieces of paper-as they have during and after wars-money may be seen to be, after all, no more than pieces of paper. The strength of the convention is, of course, what enables governments to profit by inflating (increasing the quantity of) the currency. At bottom money is, then, a social convention, but a convention of uncommon strength that people will abide by even under extreme provocation. This common knowledge makes the pieces of paper valuable because everyone thinks they are, and everyone thinks they are because in his or her experience money has always been accepted in exchange for valuable goods, assets, or services. People accept money as such because they know that others will. Whence the difference? The easy answer, and the right one, is that modern money is a social contrivance. ![]() The piece of paper labeled 1 dollar, 10 euros, 100 yuan, or 1,000 yen is little different, as paper, from a piece of the same size torn from a newspaper or magazine, yet it will enable its bearer to command some measure of food, drink, clothing, and the remaining goods of life while the other is fit only to light the fire. The subject of money has fascinated people from the time of Aristotle to the present day. What is inflation? See all videos for this article SpaceNext50 Britannica presents SpaceNext50, From the race to the Moon to space stewardship, we explore a wide range of subjects that feed our curiosity about space!.Learn about the major environmental problems facing our planet and what can be done about them! Saving Earth Britannica Presents Earth’s To-Do List for the 21st Century.100 Women Britannica celebrates the centennial of the Nineteenth Amendment, highlighting suffragists and history-making politicians.COVID-19 Portal While this global health crisis continues to evolve, it can be useful to look to past pandemics to better understand how to respond today. ![]() Student Portal Britannica is the ultimate student resource for key school subjects like history, government, literature, and more.This Time in History In these videos, find out what happened this month (or any month!) in history.#WTFact Videos In #WTFact Britannica shares some of the most bizarre facts we can find. ![]()
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