Money is a medium of exchange that overtook bartering to become the dominant system of value in modern societies. The physical form of money includes paper notes and metal coins. It is also found in digital form through bank accounts and cryptocurrencies like Bitcoin. Money functions as a unit of account in accounting, providing a way to measure and establish value for goods and services in a business. It can also be a store of value, helping people protect their savings from inflation.
A country’s currency is backed by the confidence that people place in its central banks. This is based on a country’s economic and political stability, and the fact that it has a track record of sound monetary policy.
Most countries have a specific currency they use, for example, the dollar in the United States and the euro in Europe. However, some countries don’t have their own currency and rely on others for trading and investment purposes, for instance, the Swiss franc or the British pound.
Each country’s currency has a main unit, such as the dollar or euro, and then fractional units, often defined as 1/100 of the main unit. For example, 1 euro is equal to 100 cents in the EU, or 1/100 of a dollar in the US. Currency rates constantly fluctuate on the foreign exchange market, which operates 24 hours a day, five days a week. The factors influencing these rates are complex, and include market forces and government intervention.