A Revision of Real and Monetary Dynamic Models

In process of exchange and division of labour, money plays an essential role in any developed economy. Barter — the exchange of goods for goods, or of any nonmoney asset for any other — is important in primitive societies and is never wholly absent even in the most advanced economies. Pure barter has become less important in modern economic analysis. As there may be a cQnsiderable time interval between the receipt of money and its use in exchange, a complex society has need for a stable form of money that will provide a store of value. Although the store of value function may be shared with other liquid assets, there is no substitute for money as a medium of exchange. Things used as money reflect the simplicity or complexity of the economic life of the economic system under consideration. With the progressive increase in the volume and variety of goods and services in a community, the development of a convenient means of payment and the need for a standard to measure their values are very pressing. We will see that money and its role in society, like many other institutions, has become more and more complicated.