Medium Of Exchange


DEFINITION of 'Medium Of Exchange'

An intermediary instrument used to facilitate the sale, purchase or trade of goods between parties. In modern economies the medium of exchange is currency.

BREAKING DOWN 'Medium Of Exchange'

The use of a medium of exchange allows for greater efficiency in the economy and creates more trade in the economy. In a traditional barter system, trade between two parties could only occur if one had and wanted what the other party had and wanted, and vice versa. But the chances of this occurring at the same time are minimal. Let's say one party had a cow and the other had a lawn mower: with a medium of exchange such as gold coins, all the cow owner would have to do is find a buyer for the cow and she would receive gold coins. Then all she would have to do is find someone selling a lawn mower, which she could purchase with gold coins.

  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Barter

    The act of trading goods and services between two or more parties ...
  3. Notgeld

    A German term that means "emergency money." Notgeld denotes a ...
  4. Time-Based Currency

    A currency whose value is based on one man-hour of labor. A time-based ...
  5. Dollarization

    A situation where the citizens of a country officially or unofficially ...
  6. Hard Currency

    A currency, usually from a highly industrialized country, that ...
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Investing Basics

    Understanding The Time Value Of Money

    Find out why time really is money by learning to calculate present and future value.
  3. Forex Education

    The History Of Money: From Barter To Banknotes

    Money has been a part of human history for at least 3,000 years. Learn how it evolved.
  4. Economics

    What Is Money?

    It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  5. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  6. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  7. Forex Education

    Time Value Of Money: Determining Your Future Worth

    Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation.
  8. Investing Basics

    A Simplified Approach To Calculating Volatility

    Volatility is sometimes greater than anticipated, but the way it’s measured can compound the problems that occur when it’s unexpected.
  9. Investing Basics

    Should You Trade Forex Or Stocks?

    Deciding whether to trade stocks, foreign exchange or futures contracts typically comes down to risk tolerance, account size and convenience.
  10. Investing Basics

    What's a Benchmark?

    A benchmark is a standard investors choose to gauge the performance of their portfolios.
  1. What is the history of the market economy?

    The free-market system of voluntary economic trades, or the market economy, has existed in different stages ever since human ... Read Full Answer >>
  2. What are some examples of barter transactions?

    Barter transactions occur when economic actors, such as individuals, businesses and nations, exchange goods or services without ... Read Full Answer >>
  3. What are the differences for barter transactions recognition between IFRS and USGAAP?

    Barter exchange takes place when a person or business entity provides a good or service and receives a good or service in ... Read Full Answer >>
  4. What are the risks of investing in Bitcoin?

    Bitcoin operates as a currency system and an equity-style investment. Because Bitcoins have no guaranteed value and due to ... Read Full Answer >>
  5. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  6. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center