Money and value
The value of goods and services, for various people, keeps changing in accordance with demand and supply for it. Money is a common way of expressing this value numerically.
Value of money, goods
If more value has been created in the economy, if no new money is created/ the amount of money in the system remains the same, then the value of money increases, and there is deflation. On the other hand, if the total value of the economy decreases relative to the amount of money in the system, there is inflation/ devaluation of money.
Currency
Paper currency and coins made from cheap metals is in use as currency.
Creation/ destruction
The federal bank/ reserve (Fed) of a country is responsible for creating and destroying money (devaluation). Thus, it has power to determine the value of money. It creates money by buying/ selling objects (usually government securities) from entities (usually banks) and paying for it using new money or by destroying the money it receives.
Interest rates
Banks, which suddenly end up with more or less money, react by lowering or raising the interest rates on loans and on savings accounts.
Economic behavior altered
The amount of money in the economy does not change the total actual value of the economy. But, it changes how economic entities behave.
Injecting money into the economy is a common way for the Fed to revitalize or spur growth in the economy. This comes from the fact that there is more money in banks to borrow from.
Counterfeiting
Creating fake money others will not honor, counterfeiters cheat those they transact with.
Currency History
Different civilizations used different forms of money. Yap people used huge stones. Other civilizations used gold, copper and other coins. Chinese started issuing paper money.
Gold standard
Western economies started issuing paper money after the industrial revolution, but they initially were backed by gold (aka gold standard). One could take paper money to a government agency and exchange it for gold.
This was dangerous at a time when gold was no longer common currency, and gold hoarding resulted in reduced investment in the economy. But this limited the government’s ability to create new money corresponding to spur greater investment and growth. This caused the severity of the great depression in 1930’s.