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       Why We Use Money

The best way of answering the question Why do we use money?
Is to imagine ourselves  living  thousands  of  years  ago   before money was invented.
Because  there  is  no  money,  we  cannot buy any of the things we need. We  can perhaps grow enough food to eat, build some kind   of  shelter,  and  make  rough  clothes  and   shoes  for ourselves. 

However, we will also need other things. Most  of  us will not be able to make knives  or  cooking  pots. We  will  have  to   obtain these from somebody else who can make them, and we will have to give something in exchange.

We  may  offer,  say,  a  pair  of  shoes    that  we  have  made  in exchange for a knife, but we then have  to  find  somebody  who has made a knife and who wants a pair of shoes. 
Life under these conditions is very difficult and primitive.

Since the invention of money, life  has  been  very  much  easier. 
If we need a knife we can obtain  one  by  paying  money  for   it. 
The  person  who  a  made  the  knife   accepts    our   money  in exchange because  he  can   use  it  to  buy  the  things  he   needs himself. This is what we mean when we  say  that  money   is our ‘medium of exchange’. People obtain  the  money   they  need
in various ways, for example by doing work in return  for  payment in money or by making goods and selling them  for money.

Money is our ‘medium of exchange’. In return  for  payment   in money, a shopkeeper  gives  us  the  we  need.   He  accepts  our money because he can use it to buy things for himself.

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