Lesson: Money as the medium of exchange What Is a Medium of Exchange

The Bottom Line
In an Encyclopedia Britannica article written in part by Milton Friedman, money is defined as "a commodity accepted by general consent as a medium of economic exchange." In modern economies, the local currency is the universal medium of exchange, except in dire economic circumstances. For example, as Britannica points out, the usual medium of exchange in Germany directly after World War II was cigarettes or cognac.
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