| anything generally accepted as representing a standard of value and exchangeable for goods or services. |
| medium of exchange n. pl. media of exchange or mediums of exchange Something, such as a precious metal, that is commonly used in a specific area or among a certain group of people as money. |
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.
Investopedia Commentary
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.
Related Links
Economics Basics Tutorial
What Is Money?
Understanding The Time Value Of Money
See also: Barter, Currency, Economy, Hard Currency, Money, Soft Currency