Medium of exchange

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In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services.[1] In modern economies, the most commonly used medium of exchange is currency. Most forms of money are categorised as mediums of exchange, including commodity money, representative money, cryptocurrency, and most commonly fiat money. Representative and fiat money most widely exist in digital form as well as physical tokens, for example coins and notes.

The origin of "mediums of exchange" in human societies is assumed by economists, such as William Stanley Jevons, to have arisen in antiquity as awareness grew of the limitations of barter. The form of the "medium of exchange" follows that of a token, which has been further refined as money. A "medium of exchange" is considered one of the functions of money.[2][3][4] The exchange acts as an intermediary instrument as the use can be to acquire any good or service and avoids the limitations of barter; where what one wants has to be matched with what the other has to offer.[5][6] However, there is little evidence of a pre-monetary society in which barter is the primary mode of exchange;[7] instead, such societies operated largely along the principles of gift economy and debt.[8][9][10]

  1. ^ Black, John, 1969 (2017). A dictionary of economics. Hashimzade, Nigar,, Myles, Gareth D. (5 ed.). [Oxford]. ISBN 978-0-19-181994-0. OCLC 970401192.{{cite book}}: CS1 maint: location missing publisher (link) CS1 maint: multiple names: authors list (link) CS1 maint: numeric names: authors list (link)
  2. ^ Cite error: The named reference mankiw was invoked but never defined (see the help page).
  3. ^ Cite error: The named reference krugman was invoked but never defined (see the help page).
  4. ^ Cite error: The named reference abelbernanke was invoked but never defined (see the help page).
  5. ^ William Stanley Jevons, 1875. 'Money and the mechanism of exchange' Chapter 1 http://oll.libertyfund.org/titles/jevons-money-and-the-mechanism-of-exchange
  6. ^ "Medium of Exchange Definition".
  7. ^ Humphrey, Caroline. 1985. "Barter and Economic Disintegration". Man, New Series 20 (1): 48–72.
  8. ^ Mauss, Marcel. The Gift: The Form and Reason for Exchange in Archaic Societies. pp. 36–37.
  9. ^ "What is Debt? – An Interview with Economic Anthropologist David Graeber". Naked Capitalism. 2011-08-26.
  10. ^ David Graeber: Debt: The First 5000 Years, Melville 2011. Cf. review