Medium of Exchange

A medium of exchange is a financial instrument used to facilitate the trading or exchange of goods between parties. A medium of exchange functions when all parties involved in an exchange accept that instrument. A medium of exchange allows for a more efficient trading system than the traditional barter system, in which goods are traded directly for one another. The most widely accepted mediums of exchange in the modern economy are fiat currencies.

Three important properties of money include being a medium of exchange, a store of value, and a unit of account.