Money – Short Essay.
Money is a medium of exchange and a measure of value or kind of payment. On the other hand, money is the unit of account. As a result, nothing can be bought without money. If you want to get something from a store or an unknown person then you have to pay some money for that thing.
Functions of money
As a result, there are three functions of money. The functions are medium of exchange, store of value and unit of account.
The medium of exchange is the most important function of money. So, without money, it is not possible to exchange any goods or services. For making transaction for goods or services, money is only the way for measuring equal value.
Store of value means an asset which can be saved. On the other hand, the store of value can able to maintain the value of the saved asset without depreciating. Gold, lands and other metals are called the store of value. Interest-bearing assets which produce interest that can be the good store of value.
The unit of account means the common measurement of the value of goods or services which can be exchanged by money.
Types of money
There are three different types of money. They are commodity money, fiat money, and fiduciary money. Commodity money is the oldest and most type of money. As a result, it has built depending on the natural resources which act as the medium of exchange, store of value and unit of money.
It is also related to the barter system. Commodity money makes the exchange system easier. In a commodity money system, it is defined as the intrinsic value of itself.
Fiat money is the value of government order. As a result, it is the currency without any intrinsic value established by the government.
Fiduciary money is dependent on the value of confidence which is the accepted medium of exchange. It has been built as the paper certificate which was the promise to pay for the gold or other materials.
Hence, in economics, all the functions are included. If we know all the things about money then it will be easy for us to select the purchase amount and selling amount of goods.