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The Money is any of the object which is generally accepted in a particular nation or country as a mode for the payment to purchase goods and enjoy any services or the repayment of loans, debts and payment of taxes etc. In ancient times, when the barter system was in vogue, it was extremely difficult to exchange goods and services because finding a customer and seller as per one’s requirement was a risky task.
To solve this problem the Money was invented to facilitate trade as the barter system was not able to express the value and prices of goods & services.
The term money covers all things like currency notes, coins, cheques, ban draft. The money is come into force to carry out all economic transactions and settle all the financial claims.
The Money as medium of exchange circulates from country to country and person to person to facilitate national and international trade. To know more please stay with the blog.
What is Money
– The Money is a medium of exchange that symbolizes perceived value.
– The Money is accepted by people for the payment of goods and services and accepted for the repayment of their debts.
– The Economy of any country rely on money to facilitate transactions and to power financial growth.
– The characteristics of money is the multifaceted.
Key feature of Money
– Money is a medium of exchange.
– Money allows people and businesses to obtain what they need to live and thrive.
– Bartering was one way that people exchanged goods for other goods before money was created.
– Like gold and other precious metals, money has worth because it represents something valuable.
– Fiat money is government issued currency that is not backed by a physical commodity but by the stability of the issuing government.
– Money is a unit of account. A socially accepted standard unit with which things are priced.
Classification of Money
Commodity Money
Fiat Money
Credit Money
Fiduciary Money
Metallic Money
Commercial Bank Money
Legal Tender
Paper Money
Representative Money
Full Bodied Money
Functions of money
The functions of money can be classified broadly into the following two categories –
A) Primary Function
B) Secondary Function
Primary Function
01) Medium of exchange –
This means that money can be used to pay for all transactions of goods and services.
A buyer can buy goods through money, and a seller can sell goods for money. This is the essential function of the money.
02) Measurement of value –
Money serves as a measure of value. The value of all goods and services can be expressed in the form of money.
Secondary functions –
01) Standard of deferred payments –
– It means that money acts as a ‘standard’ for making future payments.
– Money has made delayed payments much easier than before. For example – when someone borrows money from someone. So the borrower has to repay the principal amount as well as the interest amount in future.
– Money provides a convenient way to calculate and pay the interest amount to be paid in the future.
– This standard function of money has made borrowing and lending extremely convenient. It is because of this characteristic of money that financial institutions have been created.
02) Store of value –
– There the store of value means the store of money.
– Money can be easily stored for future use.
– Money is the most convenient and economical means of earning and accumulating wealth.
03) Transfer of value –
– Money also serves as a transfer of value for work done and goods purchased.
– Money provides the facility to buy and sell goods not only in the local market but also in any corner of the country and at the same time it also provides the facility that one can buy and sell goods in other parts of the world as well.
04) Value of money –
– Value of money refers to the purchasing power of money. In other words, how much quantity of goods and services can a unit of money buy and sell?
– What money can buy depends on its fixed price levels.
– Increase or decrease in the price of one unit of a commodity has no effect on the price level of money, that is, when the price level of one unit of a commodity increases, one unit of money can buy less goods than before.
– The value of money is determined by the demand for it, just like the value of goods and services.
– The value of money can be measured by how many units of money people have to spend in exchange for one unit of a commodity or it can also be said that how many units of a commodity is a unit of money capable of purchasing or how much will be the unit of the commodity? There is a formula to measure it. Formula – VM = 1/P
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