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Money (abbreviated M) is a commodity that functions as a measure of value and a medium of circulation.[1]
Types[edit | edit source]
Commodity money[edit | edit source]
The earliest form of money is commodity money, which is physically made of a valuable material such as gold or silver. The value of commodity money only changes if the production time of these materials changes. For example, Spanish gold mining in America caused severe inflation in Europe.[2]
Representative money[edit | edit source]
A middle stage of money is made of low-value materials (usually paper) instead of precious metals, but its value is still tied to gold.[2]
Fiat money[edit | edit source]
The state determines the exchange-value of fiat money, which usually also made of paper but not connected to another commodity. It represents the value of all commodities instead of any specific commodity.[2]
The state regulates the exchange-value of fiat money by requiring its subjects to pay taxes in money and not accepting any payment in kind as an alternative.[2]