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A currency is an instrument of an agreement among people. The parties to the agreement assign value to the instrument, and use it as a medium of exchange.

Conventionally its value is assigned in quantitative terms. For example, the American national currency is measured in dollars, and goods and services are 'priced' in dollars, and are available in exchange for set or negotiated amounts of dollars.

Currencies have various properties:

  • They can be brought into existence in various ways and by various authorities. Dollars (and most national currencies are currently brought into existence mostly via the mechanism of Fractional Reserve Banking, but there are other mechanisms;
  • They can hold or lose value according to various schedules, including Demurrage Currency;



Author: John Stoner