Money


 

 

Any generally accepted medium to make a payment for goods and services or paying back debts is called money. Money is the most liquid asset. In the modern world, every country’s currency is the most common form of money in that region.Physical money usually consists of two types, notes or paper money and .

History of Money

The barter system (trade between two individuals each of whom possesses something needed by the other) was in use before money was invented as a medium of exchange more than 100,000 years ago. The various objects used for trade were as diverse as barley, silver, bronze and whale teeth. While the word ‘money’ has its origins in an ancient Roman temple (Juno Moneta) where the Roman mint was located, coins were first used in ancient Greece, China and India in 400 BC. China was the first country to use paper notes as a means of trade in the seventh century, making them the most customer-friendly mode of exchange.

Money: Characteristics

Money has the following characteristics:

  • Medium of exchange: facilitating the transferability factor of trade.
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  • Unit of account: simplifying the divisibility of an exchange.
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  • Store of value: people can save it and retrieve the value it holds when needed.
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    Types of Money

    Money can be divided into the following categories:

  • Commodity money: Any commodity that is used as money itself and exchanged for its worth. For example gold, silver, rice and shells.
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  • Representative money: Token coins, certificates or digital transactions that can be dependably exchanged for a fixed amount of various commodities.
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  • Credit money: Any claim against anybody that can be utilized for purchasing commodities in the future. Examples include savings bonds and treasury bonds.
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  • Fiat money: Money issued legally by the government as a currency in the form of notes and coins.
  • The central bank of a country has the power to manipulate the supply of money in the national economy. To increase the money supply, the central bank can simply print it or can purchase government fixed-income securities from the market, putting money into public hands. On the other hand, central banks sell government securities to reduce the money supply. The payment made by the buyers of these securities forms the money taken out of supply.

     

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