Economists, however, have a language all their own when it comes to money. Theydefine it as something that serves as a medium of exchange, a unit of accounting, and a store of value. Money is a medium of exchange in the sense that we all agree to accept it in making transactions.
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Legal tender, or narrow money (M0) is the cash money created by a Central Bank by minting coins and printing banknotes. Bank money, or broad money (M1/M2) is the money created by private banks through the recording of loans as deposits of borrowing clients, with partial support indicated by the cash ratio.
We need money because we want to exchange goods and services with other people. The barter system is insanely inefficient, because you often don't need what the other person has, so we need a medium of exchange.
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