MONEY

MONEY

Due to the difficulties of the barter system, money came into existence. Initially, we use metallic money, which was replaced by the paper money over a period of time. Today there are a wide variety of assets, which are used as money or near money.

Definition:-

1) Money can be anything that is generally acceptable as a means of exchange and that at the same time act a measure and store of Value.

2) Money is anything, which is widely accepted in payments for goods or in discharge of other kinds of business obligations.

FUNCTIONS OF MONEY:-

1. Medium of Exchange:-  Perhaps the most important function of money is to serve as a medium of exchange in buying and selling goods. Under barter system, exchange required finding of two people wanting each other's goods, (double coincidence of wants) The existence of money has eliminated such requirement and the exchange transactions have become very simple. A man having wheat can sell it for money and buy anything that he wants with that money. He does not have to find a man having the commodity of his need.
2. 
   Standard of Deferred Payments:-  Money also performs one more important function of the modem times. With the invention of money, it is possible to express future payments in terms of money. A borrower borrows some amount of money today and assures to repay the same with some interest in future. All the credit transactions related to trade and commerce of modem economy are based on this function of money.
3. 
   Store of Value:-  In the absence of money, it would be difficult to store the value for the future Money makes it very convenient to store the value for the future Money does not require more space, it is durable and is readily exchangeable with the other commodities and services whenever required.
4. 
   Measure of Value:-  Money serves as a common measure of value for all the commodities and service's. The value of every commodity can be expressed in terms of money. This simplifies the exchange transactions of all the commodities on one hand, and helps to compare the values of different commodities, on the other hand.
5. 
   Other functions:-  Apart from the above-mentioned important functions of money, there are some other ways in which money helps the modem economies. It facilitates the distribution of National income among different factors of production in the form of the rewards for the services rendered by them. Thus, the labour class gets wages, the capitalists get interest, the landowners get rent and the entrepreneurs get profits in the form of money.

These are the functions of money. I hope you will understand it easily.