Bartering  -  The trading of one good for another. This requires the double Coincidence of wants, a condition met when two individuals each have different goods that they other wants.

Commodity Money  -  Money that has an intrinsic value, that is, value beyond any value given to it because it is money. An example of this would be a gold coin that has value because it is a precious metal.

Compound Interest  -  Interest that is paid on a sum of money where the interest paid is added to the principal for the future calculation of interest. Click here to see the Formula.

Consumption  -  The purchase and use of goods and services by consumers.

Currency  -  The form of money used in a country.

Defaulting on the Loan  -  When a borrower fails to repay a loan leaving the lender without the money loaned.

Demand for Money  -  The amount of currency that consumers use for the purchase of goods and services. This varies depending mainly upon the price level.

Equilibrium  -  The state in a market when supply equals demand.

Fiat Money  -  Money that has no intrinsic value, that is, its only value comes from the fact that a governing body backs and regulates the currency.

Fischer Effect  -  The point for point relationship between changes in the money supply and changes in the inflation rate.

Inflation  -  The increase of the price level over time.

Interest  -  Money paid by a borrower to a lender for the use of a sum of money.

Interest Rates  -  The percent of the amount borrowed paid each year to the lender by the borrower in return for the use of the money.

Liquidity  -  The ease with which something of value can be exchanged for the currency of an economy.

Medium of Exchange  -  An item used commonly to trade for goods and services.

Money Supply  -  The quantity of money in an economy. In the US this is controlled through policy by the Fed.

Nominal GDP  -  The total value of all goods and services produced in a country valued at current prices.

Nominal Interest  -  The percent of the amount borrowed paid each year to the lender by the borrower in return for the use of the money not taking inflation into account.

Nominal Value  -  The value of something in current dollars without taking into account the effects of inflation.

Output  -  The amount of goods and services produced within an economy.

Price Level  -  The overall level of prices of goods and services in an economy. This is used in the calculation of inflation rates.

Purchasing Power  -  The real value of a dollar. This describes the quantity of goods and services that can be purchased for a dollar, taking into account the effects of inflation.

Quantity Theory of Money  -  The theory that says that the value of money is based on the amount of money in circulation, that is, the money supply.

Real Interest  -  The percent of the amount borrowed paid each year to the lender by the borrower in return for the use of the money adjusted for inflation.

Real Value  -  The value of something in taking into account the effects of inflation.

Store of Value  -  A good that holds a value in such a way that its price is fairly insensitive inflation.

Unit of Account  -  Something that is used universally in the description of money matters such as prices. The unit of account most commonly used in the US is the dollar.

Value of Money  -  The purchasing power of the dollar. The amount of goods and services that can be purchased for a fixed amount of money.

Velocity  -  The speed with which a dollar bill changes hands. The higher the velocity of money, the quicker that a given piece of currency will be traded for goods and services.

Wage  -  The amount of money paid to workers by employers valued in current dollars.