Foundations · Module 3 of 6
What keeps money working
Why paper money still buys groceries, and the trust that keeps the whole system running.
Key terms in What keeps money working
- Fiat money
Fiat money is currency that has value because a government declares it to be money, not because it is made of or redeemable for a commodity such as gold. Modern dollar notes are an example. Their usefulness rests on legal status and on the public's confidence that others will keep accepting them in payment.
- Legal tender
Legal tender is money that a government requires to be accepted as valid payment for debts. In the United States, Congress gave all coins and currency, including Federal Reserve notes, that status in 1933. The term is distinct from lawful money, an older Federal Reserve Act concept that once covered a somewhat different set of currency.
Source: Federal Reserve Board, What is lawful money? How is it different from legal tender?
- Store of value
A store of value is an asset that lets purchasing power be set aside today and used later. Money performs this function when it keeps being accepted and does not lose too much buying power while held. The Bank of England lists it as one of money's three core functions, next to the medium of exchange and unit of account.
Source: Bank of England, What is money?
Every term on Lever is in the money glossary.
About this module
What keeps money working is part of Foundations, one of 15 subjects in Lever. It’s a short run of 5 lessons, about 13 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Foundations
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1
What money actually is
Why money exists at all, the jobs it does for you, and why every price is written in the same currency.
6 lessons -
2
The numbers underneath
Percentages, interest that grows on itself, and the cost of choosing one thing over another. The three ideas everything else leans on.
8 lessons -
4
A number and a date
Turn “I should save more” into a clear goal with a number and a date, and decide which goal comes first.
5 lessons -
5
Now versus later
Why money today is worth more than money next year, and how to weigh a choice before you make it.
5 lessons -
6
The shape of growth
How long money takes to double, and why small amounts added every month grow faster than you’d think.
5 lessons
Try this module
It’s part of Foundations. Lever will bring it to you when you’re ready, or you can go straight there.