In the larger context, money operates as part of the financial system. Flows of money affect supplies of goods and services, as well as the ability of individuals and businesses to gain credit. The money supply also influences the market through price pressures; when the economy has a surplus of money along with a surplus of goods, inflation, or rising prices, can result. This means that money's worth is always relative to the larger economy. A $100 bill means something very different today than it did 50 years ago, buying less than it once did.

Money helps markets to exist by playing an exchange role. Before paper bills (and before that, coins made of gold and other precious metals) became prevalent in society, the only medium of exchange was through barter, or trade. This meant that traders had to bring goods to market, to exchange for other goods. Although the medium of exchange could sometimes be agreed upon, a lack of a uniform medium exacerbated difficulties in markets. For example, if I had goats to trade and you had apples, we could only trade with each other if you needed goats and I needed apples. Money helps to facilitate market activity, by providing a uniform medium of exchange: goats and apples can both be exchanged for dollars. Labor can also be paid in money rather than in goods. Money received from labor can be exchanged for goods and services.

The exchange role of money works only because people recognize and agree upon the value of money. Prior to the advent of money, value was a difficult proposition; I might have though a goat is worth 50 apples, for example, while you were only willing to give me 30 apples for my goat. Money has a consistent, recognized value (although the price of a given currency, say the U.S. dollar or the British pound, may fluctuate relative to other currencies). Standardized value means that a merchant and a