Difference Between Money and Currency

Money vs Currency
 

Money and currency are two terms that are so closely related to one another that there almost seems to be no difference between the two. Many have confused the fact that money and currency refer to the same thing, and are, therefore, used interchangeably in many contexts. There are, however, a few differences between these two terms. The article that follows offers an explanation of what is meant by money and currency and shows how they are different to one another.

Money

Money is a medium that can be exchanged or traded for goods and services. Money can be used to measure the value of those goods and services at the current market price. In any economic system money is seen to be a unit of account which is quite scarce and is valuable. Money does not change or evolve over time. Money is defined to be the function that it performs as you may have heard ‘money is what money does’. Money is a tool that helps individuals, companies and participants in any economic system to communicate what is valued in a trade or exchange.

Currency

Currency is any form of money that is circulated publicly. Currency can include hard money such as coins made out of metal or soft money such as money bills made of paper. Currency has been seen to evolve over time, and hundreds of years ago when the barter system was used currency was in the form of any asset such as cattle, foods, beads, clothing, etc. Later on, currency was represented by silver and gold and the value of goods sold for these gold and silver were equal to the value of silver or gold that was traded. Due to the issues faced with trading valuable metals, paper money and coins were introduced where banks would leave the metals in their treasuries and print paper money that were backed by the value of gold and silver. This is the currency that we use today. Even though the currency bills and coins that are circulated today have no value (in terms of the actual value of the metal/paper they are made from) they represent value of gold or silver that is held in its place in the central bank’s vault.

What is the difference between Money and Currency?

The main difference between money and currency is that money is the actual value that is traded for goods and services, and currency is the paper money or coins that we carry around to make our day to day payments. For example, a $100 bill is not actually worth $100 since the bill is being backed by the value of silver and gold that is held in its place at the bank’s vault. The face value of the bill $100 in currency allows us to purchase goods and services since it is the universally accepted medium of exchange. However, the actual value or the money value of the currency is in the value of the precious gold and silver metals that hold the value of the currency.

Summary:

Money vs Currency

• Money is a medium that can be exchanged or traded for good and services. Money can be used to measure the value of those goods and services at the current market price.

• Currency is any form of money that is circulated publicly. Currency can include hard money such as coins made out of metal or soft money such as money bills made of paper.

• The main difference between money and currency is that money is the actual value that is traded for goods and services, and currency is the paper money or coins that we carry around to make our day to day payments.