Foundations · Module 1 of 6
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.
Key terms in What money actually is
- Barter
Barter is the direct exchange of one good or service for another without using money. It works only when each side happens to want what the other offers, a requirement economists call a coincidence of wants. Money emerged largely to remove that constraint, letting people sell what they produce to anyone and spend the proceeds with someone else.
Source: International Monetary Fund, Money: At the Center of Transactions
- Medium of exchange
A medium of exchange is anything that buyers and sellers widely accept in payment for goods and services. Its job is to stand between a sale and a purchase, so that the two do not have to happen with the same person. Coins, banknotes and bank balances all serve this function in modern economies.
Source: Bank of England, What is money?
- Unit of account
A unit of account is the standard used to state prices and record debts. When businesses quote everything in the same currency, goods as different as bread and haircuts can be compared directly. It is one of the three classic functions of money, alongside serving as a medium of exchange and a store of value.
Source: International Monetary Fund, Money: At the Center of Transactions
Every term on Lever is in the money glossary.
About this module
What money actually is is part of Foundations, one of 15 subjects in Lever. It’s a short run of 6 lessons, about 15 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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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 -
3
What keeps money working
Why paper money still buys groceries, and the trust that keeps the whole system running.
5 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.