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What is money in simple words?

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First of all, what is the definition of money?

By definition, money is a medium of exchange, a measure of value, or a means of payment.

For most of you, this sounds too complicated to understand so let’s explain it by looking at the characteristics of money.

What are the characteristics of money?

The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability. 

What is durability?

The durability of money means that it can be used over and over again.

After passing through sufficient hands, dollar bills will start to suffer wear and tear.

Some of them are going to be damaged and become useless. 

What is portability?

Portability means that money must be able to go wherever and that it is easy to transport as people travel. 

There’s a limit to how many dollar bills you can bring to you on a trip out to the market or to take an extreme example, buy a house or a car.

What is divisibility?

Divisibility means that money must be easily divided.

Every time you break a dollar into cents, you actually decrease the portability of money on your person as weight and space go up but the value of money goes down.

There’s a limit to how many merchants are going to be willing to accept 100 pennies as a dollar regardless of their equal value.

What is uniformity?

Uniformity of money calls for standardization of money so that it looks the same.

Due to reprints and different minting years, not all dollar bills are going to look alike!

What is a limited supply?

Limited supply states that money is only valuable if it is in limited supply.

Due to the increase in printing, a dollar bill is worth less and less every single year because the supply grows tremendously. 

What is acceptability?

Acceptability means that the form of currency must be acceptable.

As we mentioned above, it is the question if merchants are going to be willing to accept 100 pennies as a dollar regardless of their equal value.

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