For some commentators, the value of money is because of social convention. What this implies is that money has value because it is accepted, and why is it accepted? Because it has value and is accepted! Obviously, this is not a good explanation of why and how money has value.

The Difference between Money and Other Goods

Let us try another approach. Demand for a good arises from its perceived benefit. For instance, people demand food because of the nourishment it offers them. Regarding money, people demand it, not for direct use in consumption, but in order to exchange it for other goods and services. Money is not useful in itself, but because it has an exchange value—it is exchangeable in terms of other goods and services. Money is demanded because the benefit it offers is its present and future purchasing power.