The term “currency” has a fairly clear meaning in economics, but as with many other terms and statistics, the definition of currency can be as murky to economists as it is to chemists. Basically, currency is the medium of exchange used in a country and can exist in various forms, such as physical money (notes and coins) or digital money, including bank cards and mobile payments. Currencies can also be traded between countries in foreign exchange markets, which determine their relative values.

Long ago, people moved beyond the barter system and began using currencies, which embodied fungibility, durability, portability, and recognizability to facilitate the ongoing exchange of goods and services in their societies. Since then, they have taken on many forms, including the paper notes and coins that are commonly used today.

Some countries have their own national currency, while others have a single global currency, such as the euro or U.S. dollar. There are also local currencies, such as the Argentinian peso. These usually have limited trading ranges, but they can be useful in promoting local economies and providing a way to bypass the global financial system during crises.

Inflation is the most common threat to a country’s currency, as it devalues each currency unit over time. Moderate inflation is harmless, but hyperinflation can make it hard for people to keep up with the cost of living. A currency’s liquidity is another key metric, as it measures how easily you can turn cash into the goods and services you need. For example, $10 in your wallet serves as highly liquid money, whereas the same amount of money in your savings account is less useful, requiring a more complicated process to access.