Functions of money

Money is any item that may be used in paying an obligation. History tells us that
money has no specific form in early of part of human business interactions. Various
objects have been used to represent value just to facilitate the commercial transactions.

The following are the functions of money:

1. Medium of exchange – this is the most important function of money. Through it,
business transactions can be facilitated with much ease. People will generally
accept money in exchange of goods they will deliver and/or services they will
render.

2. Measure of value – the use of money in business transactions removes the usual
difficulties that the parties may encounter in barter trade. Both parties will know
exactly the amount of money to give or to receive to consummate an agreement.

3. Store of value – A person who received money as form of payment, may decide
to keep it for a while and just spend it in the future knowing that the value of it will
generally remain the same.

Characteristics of Money
The following are some of the important characteristics of money:

1. Durable – after a period that the money is transferred from one person to
another, it still retains its form and shape.
2. Portable – it is easy to carry it from one place to another.
3. Divisible – it can easily be divided into small increments making it easy to give
the exact amount of payment up to the last centavo.
4. Difficult to counterfeit – money that is easy to counterfeit will become worthless.
Its function as a medium of exchange will be lost since no one will trust its
intrinsic value anymore.
 5. Acceptable in a particular jurisdiction – generally, the creditor can be compelled
to receive it as payment.

Global currency
Ideally, money must be backed with something of value, such as gold or silver.
Its worth will be more meaningful, and its transferability will be enhanced. It would be
nice if the world will have just one currency with such intrinsic value. If this happens, the
prices of the commodities in various countries can be easily compared, and the hassle
of converting different currencies will be eliminated.

However, it remains a plan to have a global currency. Perhaps this is because of

the fear of possible loss of independent local monetary policy 1 that will govern and
address the economic problem in a particular country.

Legal tender

Legal tender is the currency which if offered as payment, in proper amount, by

the debtor, the creditor cannot refuse to accept. In Philippines, “The maximum amount
of coins to be considered as legal tender is adjusted as follows:

1. One thousand pesos (P1,000.00) for denominations of 1-Piso, 5-Piso and 10-
Piso coins; and
2. One hundred pesos (P100.00) for denominations of 1-sentimo, 5-sentimo, 10-
sentimo, and 25-sentimo coins.”2

There is no limit on Philippine currency notes.

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1
“The primary objective of BSP's monetary policy is to promote a low and stable inflation conducive to a
balanced and sustainable economic growth.” [http://www.bsp.gov.ph/monetary/overview.asp]

2
BSP Circular No. 537, Series of 2006, dated 18 July 2006