What is money ? defition of money .functions of money ?
Answers
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✰ Money ✰
Money has been defined in many ways. Some economists define money as the basis of legal acceptability. So the legal definition of money is "Anything which is widely accepted in payment for goods or in discharge of other kinds of business obligations is called money". Currency and Demand Deposits are two examples of money legally acceptable although a person can legally to take payment through cheque.
On the basis of functions performed by money, money is defined as "Money is what money does." It would mean that all those things which perform the functions of money are included in money. To quote Crowther "Money can be defined as anything that is generally accepted as a means of exchange and at the same time acts as a measure and as store of value".
✰ Functions of money are : ✰
(i) Money acts as medium of exchange -: Money serves as a medium of payments. Money helps in buying and selling of goods. Goods are exchanged for money and this money can be used for buying any other good that we need. Thus, money acts as an intermediary and facilities trade. A can sell his goods to another person B for money and then he can use that money to buy the goods he wants from other. Money has made the exchange of goods easy.
(ii) Unit of value -: Money serve as a unit of value of common measure of value in terms of which the value of all goods and services are measured. This helps in measuring the exchange values of commodities. The prices of all the goods and services can be fixed in terms of money and the problem of expressing of the value of each commodity in terms of quantities of other goods can be avoided. Unit of value function of money makes possible of keeping business accounts. It would not be possible to keep business accounts unless all business transactions are expressed in money.
(iii) Standard of deferred payments -: Money also serves as a standard of deferred payments. Deferred payments refer to those payments which are made in future. When we borrow money from somebody in the present, we have to return both the principal as well as interest amount at some future date. It is easy to make such payments in terms of money because its price remains relatively stable compared to other commodities.
(iv) Store of value -: Money serve as a store value. It means that money is an asset and can be stored in future. Under barter system, storing of value (savings) is very difficult in terms of goods. But money has completely solved this problem. Now, savings are done in terms of money. Whereas the value of goods are frequently changing, the value of money is more or less stable. Moreover, goods are perishable, money is not perishable in the same sense. Money occupies less space for storage in comparison with goods. Hence, money is the best form of store of value.
Answer:
Money is a paper instrument that helps in the market to regulate the exchange of goods and services and accept as the payment as well as incomes. These paper instruments are issued by RBI ( Reserve Bank of India ) that are notes of 5 rupees to 2000 notes. Every note has a certified value on it. The coins and 1 rupee note is issued by the Finance Ministry of the Nation. The money also is made up of metals like gold, silver or copper that are valued as the number of metals used in.
Definition of Money -
" This is an instrument that provides certain value to the material they are made off and obtain the value of the metals they are made with. This helps to bring efficiency in the market to make purchases and selles without the issues of having a fixed value and medium to exchange with.
Importance of money -
• Works as a medium of exchange - Money is issued to bring efficiency and effectiveness in the market place to have the quick exchange of goods and services.
• Easy payment - It made the payment decision easy by removing the confusion of their respective values and amount because money has its specific values.
• Deferred payment - Sometimes, no having sufficient money to pay off at a time of purchase leads to the clash of obtaining the goods and services. Whereas, money helps to pay the value in the future.
• Fixed value - Money, the notes denoted has a certain value assigned. These lead to a better understanding in regards to the exchange of goods and services.
• Stock up - Money can be stocked up whereas when goods are exchanged for goods decided of buying difficult due to the nature of goods they are exchanged in