I have not used money in any of the economic transactions that I have depicted so far. Ultimately all economic transactions—whether of producer or consumer goods—consist of goods for goods exchanges, whether traded directly or indirectly using money.

Before we proceed to transactions denominated in money, we need to understand something about the nature of money. In the next few pages we will:

• Define money.
• Explain the essential elements of that definition.
• Discuss the characteristic of money that gives it value.
• Describe some of the monetary aggregates used in economic data.