The Functions of Money
The monetary economy is a significant improvement over
the barter system, in which goods were exchanged directly for other goods.
To understand some of fundamental principles of
macroeconomics, it's extremely important to have an unambiguous definition of
what money is. Generally people use the word "money" as a direct synonym
for "wealth", however economists maintain that these two terms are
not synonymous. Money presents a good, which functions as a medium of exchange
in transactions.
In the majority of economies, this currency is presented
in metal coins and paper bills, which were especially created by the government.
Classically money functions as a medium of exchange, unit of account and a
store of value.
Money's most obvious function is as a medium of exchange. For
an item to be generally accepted as money, it must be broadly used as payment
for services and goods. Consequently money creates efficiency because it gives
certainty about the widely accepted item of payment for various businesses.
Money's second function is as a unit of account. For
an item to be generally accepted as money, it has to be the common base of comparison that people can use to
present prices and record debts. When
a new visitor walks into a cafe, the menu tells him that a Greek salad costs $6
and a Grilled Chicken and Avocado Sandwich costs $13. He knows what this means
and he is able to compare the prices. Having
a constant unit of account undoubtedly creates efficiency. Otherwise, it would
be pretty confusing to have the price of bread quoted as a number of oranges,
the price of an orange quoted in terms of apples, and so on.
Money's third important function is as a store of value. For
an item be generally accepted as money, it must hold its purchasing power over
a protracted period. Money has to able to be reliably stored,
saved and retrieved. This money feature adds to efficiency as well since it
gives flexibility in the timing of sales and purchases to consumers and producers,
while eliminating the necessity to immediately trade one's income for services
and goods.
To conclude, money was introduced to societies as a
tool for conducting economic transactions more efficient and simpler.
Interesting
to know..
History of money
Metals objects introduced as money dates back to 5000
B.C. There are a lot of myths
about the origins of money.
By 700 BC, in the Western world the Lydians became the first who started making
coins. All countries started minting their own coins of different types of
values. In fact, metal was used as a material for money because it was easily
available, tractable and recyclable. Since coins have got a certain value, it
became much easier to compare the cost of items that people needed.
Some of the earliest paper money was introduced in
China about AD 960.
Комментариев нет:
Отправить комментарий