As you can see, money offers consumers and businesses some very basic and practical benefits. Money was invented as an alternative to bartering. The major benefit of money is that it increases the efficiency of an economy by reducing transactions costs. When people can use money instead of bartering, this leads to more specialization and better division of labor within the economy.
In an economy with money, Margie and Mike can specialize in what they do best instead of what they can use to exchange with other people. Margie can bake cakes instead of being a farmer, and Mike can repair cars, which he's really good at, instead of raising cattle.
Why does this really matter? Because an economy with more specialization and division of labor trades more often, produces more, and enjoys greater economic output.
