What it is:
Paper money is a medium of exchange for goods or services within an economy. It is printed on paper, rather than in coin form.
How it works/Example:
Some paper money is fiat money, meaning that it has no intrinsic value. That is, the paper used to create the is not worth very much in terms of its value as a raw material. Most paper is fiat , and its value comes from what it represents rather than what it is. Before 1971, the U.S. dollar was not fiat -- it was backed by a corresponding amount of gold held with the Federal Reserve.
Why it matters:
Most paper money only has value because people want it. This idea is what made beaver pelts, shells, peppercorns, tulip bulbs and other things into
This isn't to say that paper is the only form of viable today. Quite often, companies use of their own stock as to acquire other companies, and anybody who has ever watched a crime show knows that cigarettes can buy a in prison.