A medium of exchange replaces barter/trading economies. Rather than moving around products for trading, the economy’s consumers use the medium of exchange as a way to conduct various transactions. In a modern economy, the medium of exchange is currency. A medium of exchange must have a standard and stable value. Consumers must also accept and trust that the medium of exchange will retain its value and continue to remain in demand. If the medium of exchange begins to lose its value, consumers will no longer be able to budget or forecast with any accuracy. As well, determining supply and demand will become impossible.
