What is money？ That is not so simple a question as might appear. In fact, money can only b

e defined in terms of the functions it performs—that is, by the need it fulfills. As Sir Ralph Hawtrey once noted, "Money is one of those concepts which, like a teaspoon or an umbrella, but unlike an earthquake or a buttercup, are definable primarily by the use or purpose which they serve." Money is anything, regardless of its physical or legal characteristics, that customarily and principally performs certain functions.

Three such functions are usually specified, corresponding to the three basic needs served by money—the need for a medium of exchange, the need for a unit of account, and the need for a store of value. Most familiar is the first, the function of a medium of exchange, whereby goods and services are paid for and contractual obligations discharged. In performing this role the key attribute of money is general acceptability in the settlement of debt. The second function of money, that of a unit of account, is to provide a medium of information—a common denominator or numeraire in which goods and services may be valued and debts expressed. In performing this role money is said to be a "standard of value" or "measure of value" in valuing goods and services and a "standard of deferred payment" in expressing debts. The third function of money, that of a store of value, is to provide a means of holding wealth.

The development of money was one of the most important steps in the evolution of human society, comparable in the words of one writer "with the domestication of animals, the cultivation of the land, and the harnessing of power". Before money there was only barter, the archetypical economic transaction, which required an inverse double coincidence of wants in order for exchange to occur. The two parties to any transaction each had to desire what the other was prepared to offer. This was an obviously inefficient system of exchange since large amounts of time had to be devoted to the necessary process of search and bargaining. Under even the most elemental circumstances barter was unlikely to exhaust all opportunities for advantageous trade.

Bartering is costly in ways too numerous to discuss. Among others, bartering requires an expenditure of time and the use of specialized skills necessary for judging the commodities that are being exchanged. The more advanced the specialization in production and the more complex the economy, the costlier it will be to undertake all the transactions necessary to make any given good reach its ultimate user by using barter.

The introduction of generalized exchange intermediaries cut the Gordian knot of barter by decomposing the single transaction of sale and purchase, thereby obviating the need for a double coincidence of wants. This served to facilitate multilateral exchange; the costs of transactions reduced, exchange ratios could be more efficiently equated with the demand and supply of goods and services. Consequently, specialization in production was promoted and the advantages of economic division of labor became attainable all because of the development of money.

The usefulness of money is inversely proportional to the number of currencies in circulation. The greater the number of currencies, the less is any single money able to perform. efficiently as a lubricant to improve resource allocation and reduce transaction costs. Diseconomies remain because of the need for multiple price quotations (diminishing the information savings derived from money's role as unit of account) and for frequent currency conversions (diminishing the stability and predictability of purchasing power derived from money's roles as medium of exchange and store of value). In all national societies there has been a clear historical tendency to limit the number of currencies, and eventually to standardize the domestic money on just a single cur

A．is common knowledge among informed people

B．is a section of a controversial economic theory

C．breaks new ground in economic thinking

D．is a comprehensive analysis of monetary policy