Money as a medium of exchange

Let's look at a simple example of a barter exchange. Suppose that you traded one of your ranch's horses for a cow. What a good deal, right? Now, a week later, you go out for dinner, you finish the meal, the waitress comes over to give you the bill, and you prepare to pay her with a part of the cow that you got earlier! We can imagine that such a situation will not end well!

This is where we need money! Money is your medium of exchange. Often, you cannot trade a good or service for another good or service directly. Money is an intermediate commodity that is universally accepted and has a standard value for all parties. That's why it facilitates value exchanges more efficiently than barter trade.