Fast-forward two thousand years and bartering has long been replaced by a currency-based system. It is interesting to note that gold and silver lasted many centuries as the basis of economic measure and even into relatively recent history of the gold standard, which we’ll cover in the next section. Only coins that consist of the pure precious metal are bullions all other coins are referred to simply as coins. Gold and silver coins gradually emerged in the use of trading, although the level of pure gold and silver content impacted the coins value. However, bartering remained the most common form of exchange and trade. History shows that ancient Egypt and Mesopotamia-which encompasses the land between the Euphrates and Tigris Rivers and is modern-day Iraq, parts of eastern Syria, southwest Iran, and southeast Turkey-began to use a system based on the highly coveted coins of gold and silver, also known as bullion, which is the purest form of the precious metal. That worked well if the two people each wanted what the other had. Thousands of years ago, people had to barter if they wanted to get something. Money provides us with a universally accepted medium of exchange.īefore the current monetary system can be fully appreciated, it’s helpful to look back at history and see how money and systems governing the use of money have evolved. Without money, individuals and businesses would have a harder time obtaining (purchasing) or exchanging (selling) what they need, want, or make. Why do economies need money? This module defines money as a unit of account that is used as a medium of exchange in transactions.