explain the characteristics of money ?
in 500 words.
Answers
Answer:
First, to serve as an effective medium of exchange and store of value, money must be durable. Durability is when an item is able to withstand all the hardships and is still able to maintain to be undamaged and usable after a long term of usage. (SubraMoney, 2011) Durability is crucial for money to be able to perform the following functions of medium of exchange and store of value. Coins and paper bills are made to perform and to act as the currency. Nowadays, Money is manufactured with the materials such as paper, metal and plastics, which results to a long lasting medium. (SubraMoney, 2011)
Portability, which also serves as a medium of exchange, (Money Characteristics, 2011) means that money can be movable from place to place to be used as monetary transaction to be exchanged for goods and services. Portability also means that consumers are now able to carry money along with them to be used as transactions for goods and services. In modern days, money is carried from one location to another without needing much effort as all types of money such as cash notes, coins and cards are carried easily in a wallet. (SubraMoney, 2011)
Furthermore, divisibility is a characteristic which means the money can be divided into small units and that it can be used in exchange for goods and services. As to function as the medium of exchange, as it is divisible, it can be used to purchase all kinds of goods with different values. As money functions as the medium of exchange it must have denominations to be traded for all goods and services, and everything in between. (Money Characteristics, 2011)
Moreover, uniformity means that all types of the same denomination of money must consist of purchasing power. It is a characteristic to perform the function of standard of deferred payments. (SubraMoney, 2011)
Limited supply is a characteristic which helps in storing the value of money, meaning that constraints on the amount of money in the monetary circulation ensure that values remain constant for the currency. Currently most of the respective country’s government has the responsibility to control an adequate money supply based on market with their monetary policies, such as expansionary monetary policy and contractionary monetary policy. (SubraMoney, 2011)
Acceptability supports the function of medium of exchange. The essential quality of money is that it must act as an item being acceptable to all, without having any hesitation in the exchange for goods and services. Acceptability means that everyone must be able to accept the money for transactions. Money is universally accepted around the world as a universal mean for transaction. (SubraMoney, 2011)
Lastly, the characteristic of non-counterfeitability which functions as the store of value means that money cannot be easily duplicated. As money cannot be easily duplicated, it prevents the unrestricted and illegal creating of duplication of money. Besides, preventing the duplication of money to happen is one of the main reasons of government existence. (Money Characteristics, 2011)
Answer:
The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability.
- A cow. Cattle have been used as money at different points in history.
- A stack of U.S. 20-dollar bills equal to the value of one cow.