Features of money in economics. 10 Best Characteristics Of Money 2019-02-02

Features of money in economics Rating: 4,9/10 1955 reviews

Functions of Money, Economic Lowdown Podcasts

features of money in economics

For making foreign exchange payments, paper money is not acceptable unless it is a key currency like the dollar. Money is considered as an asset because it is a permanent abode of purchasing power, i. Value will thus be transferred. While this situation may sound preposterous, it actually existed at one time. In any society production is aimed at the satisfaction of material wants. But before discussing the functions of money, lets define the money.

Next

The Seven Characteristics of Money

features of money in economics

Anyway, it is a short article but an odd one in that he does believe in a banking cartel yet thinks they are working towards a gold standard. The likelihood of a double coincidence of wants, however, is small and makes the exchange of goods and services rather difficult. The author seems to believe that very few people have gold. Because I know others will accept it, I am comfortable accepting it. The production is made through the various factors of production like land, labor, capital and organization. The University of California Santa Barbara says are to serve as a medium of exchange, a unit of account and as a store of value. Many people cite gold as an example of commodity money since they assert that gold has intrinsic value aside from its monetary properties.

Next

Top 6 Functions of Money

features of money in economics

Thus one of the disadvantages of the barter system is that any commodity or service has a series of exchange values. Much political discussion centers around the issue of commodity or, more precisely, commodity-backed money versus fiat money, but, in reality, the distinction between the two isn't quite as large as people seem to think, for two reasons. The drawee accepts the bill and becomes liable to make payment on due date. Historically, cows have been used as a monetary exchange mechanism. Thus, when goods are bought on hire-purchase, they are given to the buyer upon payment of a deposit, and he then pays the remaining amount in a number of installments. However, they do not possess the six characteristics of money. The consumer can buy the necessary goods at reasonable rates to get maximum utility.


Next

FUNCTIONS OF MONEY

features of money in economics

. Money serves as a store of value, a unit of account and as a medium of exchange. Borrowers can use money to obtain goods and services when they are needed most. They are generally of lower denominations. So this is also from one of the utmost important functions of money.

Next

Define Money

features of money in economics

The mass production is possible with division of labor that depends upon money. If money had been used, the seller could then use it to buy whatever he wanted, whether it is wheat or something else—now or in future. For example: If I raise chickens and want to buy cows, I would have to find a person who is willing to sell his cows for my chickens. In the 1980s, the Communist Party in Romania declared that Kent cigarettes were an acceptable medium of exchange. But each factor does not contribute equally to the product. However, the functional value of the stored money may change over time due to other factors. Money as an Asset: In a monetary economy, individuals also use money as an asset.

Next

The Different Types of Money in an Economy

features of money in economics

To raise long term funds by issue of shares, debentures the company will have to incur floatation cost such as brokerage, commission, printing of prospectus etc. Uniformity establishes a standard for the look of various denominations. Money effectively eliminates the double coincidence of wants problem by serving as a medium of exchange that is accepted in all transactions, by all parties, regardless of whether they desire each others' goods and services. To summarize, money has taken many forms through the ages, but money consistently has three functions: store of value, unit of account, and medium of exchange. There exists a money market dealing with short-term credit and a capital market dealing with long-term credit. It is valued because it is legal tender and people have faith in its use as money. From the above cited definitions, it is clear that or an objective of money is to perform the duties of medium of exchange among different parties.

Next

Uses and Characteristics of Money

features of money in economics

We earn it and spend it but don't often think much about it. These are considered safest investment as these are issued by R. A Medium of Exchange: The only alter­native to using money is to go back to the barter system. Like other assets, wealth can be stored in the form of money. Your money acts as a common ground for determining value.

Next

The Seven Characteristics of Money

features of money in economics

Limited supply ensures that money holds its value. Since all types of coins are issued by the state authorities either the Treasury or the Central Bank of the country they are regarded as legal tender. Examples of commodity money are gold and silver coins. The raw material is purchased to make new things. Therefore, the distribution of product equally among the factors of production is unjust. For example firm wants to raise long term funds to buy a new office building and machinery. The main business of the banks and other institutions is to collect saving of the people and lend such collection for earning the profit.

Next

What Are the Main Characteristics of Money?

features of money in economics

Bills : Treasury bills are issued by Reserve Bank of India on behalf of the Government of India. Paper money can circulate within the domestic economy only. Sundays and other holidays are excluded for this purpose. Money acts as a unit of account, a medium of exchange and a store of value. In the modern monetary systems, there are three forms of money in actual use: i Metallic Money, ii Paper Money, and iii Credit Money. Twenty-dollar bills are all the same size and shape and value; they are very uniform.

Next