What is Money AND Its Functions

Money, a commodity accepted by general consensus as an economic medium of exchange. It is the medium in which prices and values ​​are expressed; As a currency, it circulates anonymously from person to person and from country to country, facilitating trade and being the main measure of wealth.

Hướng dẫn đăng ký 188bet

The subject of money has fascinated people from the time of Aristotle to the present day. The sheet of paper labeled with 1 dollar, 10 euros, 100 yuan or 1000 yen is slightly different, like paper, from a sheet of the same size torn from a newspaper or magazine, but it will allow its bearer to control a certain measure of food, drink, clothes and the other goods of life while the other is only capable of lighting the fire. Where does the difference come from? The easy and correct answer is that modern money is a social trick. People accept money as such because they know that others will. This common knowledge makes pieces of paper valuable because everyone thinks they are and everyone thinks they are because, in their experience, money has always been accepted in exchange for valuable goods, resources, or services. After all, money is therefore a social convention, but a convention of unusual force that people will adhere to even under extreme provocation. The strength of the convention is, of course, that it allows governments to benefit by inflating (increasing the amount) the currency. But it is not indestructible. When there are large increases in the quantity of these pieces of paper, as happened during and after wars, money can appear, after all, to be nothing more than pieces of paper. If the social order that sustains money as a medium of exchange is broken, people will seek substitutes, such as cigarettes and brandy, which for a time served as a medium of exchange in Germany after World War II. New money can replace old money in less extreme conditions. In many countries with a history of high inflation, such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the US dollar, because the dollar has a more stable value than the local currency. In addition, the residents of the country accept the dollar as a medium of exchange because it is well known and offers more stable purchasing power than local money.

Functions of money
The fundamental function of money is to separate the purchase from the sale, thus allowing the exchange to take place without the so-called double coincidence of barter. In principle, credit could perform this function, but, before granting credit, the seller would like to know the prospects for repayment. This requires much more information about the buyer and imposes information and verification costs that the use of money avoids.

Leave a Comment