Now, it is generally agreed that paper or electronic money is the best barter good. Naturally this idea requires that its supply be limited. If its supply is not limited, inflation or a loss of the money's value occurs. Note that inflation is always a loss of the available money's value. The goods themselves, wheat, manufactured articles, and so on, do not change value fast and drastically.
Banks multiply money.
The government can regulate the value of money by changing the amount of the legal reserve and thus make money more plentiful or more scarce. Go back to table of terms . In the last 2,000 years, the advantage of having a certain amount of money at hand has become evident. This amount of money should be vastly greater than that needed for immediate barter. This money can then be loaned by one IS to another.