Money is that which is accepted freely in payment of debt. It is the principal medium of exchange, and the common measure of value.
Any commodity may be used as money, and at different times several kinds of things have been so used before the introduction of metallic money, such as cattle, skins, shells, etc.
As to metals, iron was early used, then lead, and even tin ; but eventually, gold and silver, and copper; the two former being the most valuable, since a small weight of them is equal to a large weight of most other substances ; nor do they vary in quality or change in value to any extent.
The legal medium of exchange of a nation is called currency, that which passes current, or circulates as money. It is divided into metallic or specie currency and paper currency.
The former embraces gold, silver and copper coins; the latter means the notes and bills issued by the Government or by authorized banking corporations as an equivalent for coined money. Such notes may be either convertible into coined money on presentation, or inconvertible, according to the law which has made them a legal tender.
Such currency is called free, as being willingly received in trade to any amount for the full value it represents, while conditional or optional currency is that which, although a legal tender by law, is practically accepted in payment only within certain limits, or at a certain discount.
Such a discount, viz., the difference of value existing between free and conditional currency, or between metallic and paper money, is called ago or premium.
Thus it is said, for instance, that gold is at a premium of 5 per cent, on paper, or that there is an ago of 5 per cent, on gold, which means that 105 units in paper money are given for 100 units in gold.