A medium of exchange is anything that is widely accepted as payment for goods and services. To function effectively, it must be trusted by participants in an economy, easily transferable, and reasonably stable in value over short periods of time. Money serves as a medium of exchange when buyers and sellers are confident it can be exchanged again in the future without significant loss of purchasing power. Historically, commodities such as gold and silver fulfilled this role, while modern economies rely primarily on fiat currencies. Assets that are highly volatile or not broadly accepted generally struggle to function as a reliable medium of exchange.
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