Money

Under the
: supervision of Dr
Money and banking project :
Rasha sameh

Group : G
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Names and Ids:

1. Verontina atef meshreky : 820604

2. Omar adel : 820543
3. Amr ramadan yassin : 820567
4. Fatma el zhraa awadalah mohamed : 820579
5. Karim ezzat hosny : 820618
6. Fathi ramadan sakr : 820586
7. Karim hossam el din abd el halim mohamed : 820614
8. Amr khaled ahmed kamel : 820564
9. Kareem ehab fawzy : 820612
10.Farida mohamed abd el hamid shaaban : 820599
11.Omar mostfa mohamed : 820556
12.Awatef bassam el kabany : 820572
13.Kamal mohamed kamal : 820628
14.Kareem ahmed samir : 820610
15.Kareem mohamed farouq : 820624
16.Omar mohamed soliman : 820551
17.Kareem tamer helmy : 820613
18.Omar aly rashad bayomy : 820547
19.Amr medhat reyad : 820569
20.Kareem kamal hassan : 820622

General meaning of money :

money, a commodity accepted by general consent as a medium of economic exchange. It is

the medium in which prices and values are expressed; as currency, it circulates anonymously
from person to person and country to country, thus facilitating trade, and it is the principal
measure of wealth.

What Is Money?

Money is any item or medium of exchange that symbolizes perceived value. As a result, it is
accepted by people for the payment of goods and services, as well as the repayment of loans.
Money makes the world go 'round. Economies rely on money to facilitate transactions and to
power financial growth. Typically, it is economists who define money, where it comes from,
and what it's worth. Here are the multifaceted characteristics of money.
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Money may make the world go around, as the song says. And most people in the world
probably have handled money, many of them on a daily basis. But despite its familiarity,
probably few people could tell you exactly what money is, or how it works.
In short, money can be anything that can serve as a
• store of value, which means people can save it and use it later—smoothing their purchases
over time;
• unit of account, that is, provide a common base for prices; or
• medium of exchange, something that people can use to buy and sell from one another.
Perhaps the easiest way to think about the role of money is to consider what would change if
we did not have it.
If there were no money, we would be reduced to a barter economy. Every item someone
wanted to purchase would have to be exchanged for something that person could provide.
For example, a person who specialized in fixing cars and needed to trade for food would
have to find a farmer with a broken car. But what if the farmer did not have anything that
needed to be fixed? Or what if a farmer could only give the mechanic more eggs than the
mechanic could reasonably use? Having to find specific people to trade with makes it very
difficult to specialize. People might starve before they were able to find the right person with
whom to barter.
But with money, you don’t need to find a particular person. You just need a market in which
to sell your goods or services. In that market, you don’t barter for individual goods. Instead
you exchange your goods or services for a common medium of exchange—that is, money.
You can then use that money to buy what you need from others who also accept the same
medium of exchange. As people become more specialized, it is easier to produce more,
which leads to more demand for transactions and, hence, more demand for money

Money is a good that acts as a medium of exchange in transactions. Classically it is said that
money acts as a unit of account, a store of value, and a medium of exchange

What is money? It can be anything people want it to be—literally….

Before coins or paper money, people exchanged (traded) fish for stone tools or leather goods
for wood. This method of exchanging one thing for something else is called barter. It is still
in use today: Sue might agree to fix Ramon’s electrical wiring if Ramon agrees to figure
Sue’s income tax. They’ve exchanged services, not goods, but they’ve still bartered….
The difference between barter and money is the situation. Money can be used in most
situations; in a barter, each individual must have something to exchange that the other
individual needs or wants. Sue and Ramon can agree to swap electrical work for accounting,
but Harold, another accountant, might insist on being paid in dollars and cents. Harold may
not need any electrical work done, and he can spend dollars anywhere….

Types of Money
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In all of these considerations, there remains several types of currency that all fit these
criteria. The list below names all forms of money along with their descriptions.

Fiat Money

This kind of money is valuable essentially because the government has legally declared it to
be. It is not backed by an asset but rather is guaranteed by a government's central bank to be
legally exchangeable for all transactions within the economy. The US dollar is fiat money as
its value is only guaranteed by the promise of the US government and has no other intrinsic
value.

Market Determined Money

Much like bartering, this type of money is used in certain markets where it is more efficient
than other forms of exchange. This is also very similar to commodity money in that it is an
asset that has value independent of that as currency, but its value is determined within the
markets that use them as currency.

Fiduciary Money

This type of money is representative of an underlying asset. That is, paper notes that are
trusted to be backed by a commodity (gold, silver, etc.) or other universally valuable types of
money. Fiat money has no value as anything except money.

Irena Asmundson and Ceyda Oner

Without it, modern economies could not function
What Is Money?
Money may make the world go around, as the song says. And most people in the world
probably have handled money, many of them on a daily basis. But despite its familiarity,
probably few people could tell you exactly what money is, or how it works.
In short, money can be anything that can serve as a
• store of value, which means people can save it and use it later—smoothing their purchases
over time;
• unit of account, that is, provide a common base for prices; or
• medium of exchange, something that people can use to buy and sell from one another.

Perhaps the easiest way to think about the role of money is to consider what would change if
we did not have it.
If there were no money, we would be reduced to a barter economy. Every item someone
wanted to purchase would have to be exchanged for something that person could provide.

For example, a person who specialized in fixing cars and needed to trade for food would
have to find a farmer with a broken car. But what if the farmer did not have anything that
needed to be fixed? Or what if a farmer could only give the mechanic more eggs than the
mechanic could reasonably use? Having to find specific people to trade with makes it very
 5

difficult to specialize. People might starve before they were able to find the right person with
whom to barter.

But with money, you don’t need to find a particular person. You just need a market in which
to sell your goods or services. In that market, you don’t barter for individual goods. Instead
you exchange your goods or services for a common medium of exchange—that is, money.
You can then use that money to buy what you need from others who also accept the same
medium of exchange. As people become more specialized, it is easier to produce more,
which leads to more demand for transactions and, hence, more demand for money.

Many monies
To put it a different way, money is something that holds its value over time, can be easily
translated into prices, and is widely accepted. Many different things have been used as
money over the years—among them, cowry shells, barley, peppercorns, gold, and silver.

At first, the value of money was anchored by its alternative uses, and the fact that there were
replacement costs. For example, you could eat barley or use peppercorns to flavour food.

The value you place on such consumption provides a floor for the value. Anyone could grow
more, but it does take time, so if the barley is eaten the supply of money declines. On the
other hand, many people may want strawberries and be happy to trade for them, but they
make poor money because they are perishable. They are difficult to save for use next month,
let alone next year, and almost impossible to use in trade with people far away.

There is also the problem of divisibility—not everything of value is easily divided, and
standardizing each unit is also tricky; for example, the value of a basket of strawberries
measured against different items is not easy to establish and keep constant. Not only do
strawberries make for bad money, most things do.

But precious metals seemed to serve all three needs: a stable unit of account, a durable store
of value, and a convenient medium of exchange. They are hard to obtain. There is a finite
supply of them in the world. They stand up to time well. They are easily divisible into
standardized coins and do not lose value when made into smaller units. In short, their
durability, limited supply, high replacement cost, and portability made precious metals more
attractive as money than other goods.

Until relatively recently, gold and silver were the main currency people used. Gold and silver
are heavy, though, and over time, instead of carrying the actual metal around and exchanging
it for goods, people found it more convenient to deposit precious metals at banks and buy
and sell using a note that claimed ownership of the gold or silver deposits.
Anyone who wanted to could go to the bank and get the precious metal that backs the note.
Eventually, the paper claim on the precious metal was delinked from the metal.

When that link was broken, fiat money was born. Fiat money is materially worthless, but has
value simply because a nation collectively agrees to ascribe a value to it. In short, money
works because people believe that it will. As the means of exchange evolved, so did its
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source—from individuals in barter, to some sort of collective acceptance when money was
barley or shells, to governments in more recent times.

Even though using standardized coins or paper bills made it easier to determine prices of
goods and services, the amount of money in the system also played an important role in
setting prices.

For example, a wheat farmer would have at least two reasons for holding money: to use in
transactions (cash in advance) and as a buffer against future needs (precautionary saving).
Suppose winter is coming and the farmer wants to add to his store of money in anticipation
of future expenses.
If the farmer has a hard time finding people with money who want to buy wheat, he may
have to accept fewer coins or bills in exchange for the grain.
The result is that the price of wheat goes down because the supply of money is too tight.

One reason might be that there just isn’t enough gold to mint new money. When prices as a
whole go down, it is called deflation. On the other hand, if there is more money in
circulation but the same level of demand for goods, the value of the money will drop. This is
inflation—when it takes more money to get the same amount of goods and services (see
“What Is Inflation?” in the March 2010 issue of F&D).

Keeping the demand for and supply of money balanced can be tricky.
Manufacturing money

How money is measured

Fiat money is more efficient to use than precious metals. Adjustments to its supply do not
depend on the amount of precious metal around. But that adds its own complication:
Precisely because there is a finite amount of precious metals, there is a limit on the amount
of notes that can be issued.

If there is no gold or silver to back money, how do governments know how much to print?
That gets into the dilemmas governments face.

On the one hand, the authorities will always be tempted to issue money, because
governments can buy more with it, hire more people, pay more wages, and increase their
popularity. On the other hand, printing too much money starts to push up prices. If people
start expecting that prices will continue to rise, they may increase their own prices even
faster. Unless the government acts to rein in expectations, trust in money will be eroded, and
it may eventually become worthless.

That is what happens during hyperinflation. To remove this temptation to print money willy-
nilly, most countries today have delegated the task of deciding how much money to print to
independent central banks, which are charged with making the call based on their assessment
of the economy’s needs and do not transfer funds to the government to finance its spending
(see “What Is Monetary Policy?” in the September 2009 issue of F&D).
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The term “printing money” is something of a misnomer in itself. Most money today is in the
form of bank deposits rather than paper currency (see box).
Belief can fade

Countries that have been down the path of high inflation experienced first-hand how the
value of money essentially depends on people believing in it. In the 1980s, people in some
Latin American countries, such as Argentina and Brazil, gradually lost confidence in the
currency, because inflation was eroding its value so rapidly. They started using a more stable
one, the U.S. dollar, as the de facto currency. This phenomenon is called unofficial, or de
facto, dollarization. The government loses its monopoly on issuing money—and
dollarization can be very difficult to reverse.

Some policies governments have used to restore confidence in a currency nicely highlight
the “faith” part of money functioning. In Turkey, for example, the government rebased the
currency, the lira, eliminating six zeros in 2005. Overnight, 1,000,000 liras became 1 lira.
Brazil, on the other hand, introduced a new currency in 1994, the real.

In both countries, citizens went along, demonstrating that as long as everyone accepts that a
different denomination or a new currency is the norm, it simply will be. Just like fiat money.
If it is accepted as money.

Characteristics of Money:

The four main characteristics of money are durability, divisibility, transportability, and non-
counterfeit as seen in Figure 2.

Characteristics of Money: Durability

Refers to the physical ability of money to withstand damage, decomposition, or change of
any sort. Money should and must be able to retain its durability

Characteristics of Money: Divisibility

This refers to money's ability to be divided into smaller parts while all the smaller parts have
value. $100 equals two $50 notes, and both have the same value.

Characteristics of Money: Transportability

Transportability is money's ability to be easily carried around, which makes it possible for
individuals to perform transactions when they go out

Characteristics of Money: Non-counterfeit

Money can't be easily counterfeited. People need to trust that money is not likely to be
counterfeit. Otherwise, all of our money would quickly lose value, and vendors would not
want to accept it for payment purposes.

Functions of Money
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Money is often defined in terms of the three functions or services that it provides. Money
serves as a medium of exchange, as a store of value, and as a unit of account.
Medium of exchange.

Money's most important function is as a medium of exchange to facilitate transactions.

Without money, all transactions would have to be conducted by barter, which involves direct
exchange of one good or service for another.

The difficulty with a barter system is that in order to obtain a particular good or service from
a supplier, one has to possess a good or service of equal value, which the supplier also
desires. In other words, in a barter system, exchange can take place only if there is a double
coincidence of wants between two transacting parties.

The likelihood of a double coincidence of wants, however, is small and makes the exchange
of goods and services rather difficult. Money effectively eliminates the double coincidence
of wants problem by serving as a medium of exchange that is accepted in all transactions, by
all parties, regardless of whether they desire each others' goods and services.

This function of money eliminates the major problem of double coincidence of wants and the
problems related to the barter system.

This function of money facilitates the trade in an economy and allows purchase and sale to
be conducted independently of each other.

Money itself does not have the power to satisfy human wants. However, it commands the
power to buy goods and services wanted and required by human beings, which can in return
satisfy their wants.

Store of value. In order to be a medium of exchange, money must hold its value over time;
that is, it must be a store of value.

If money could not be stored for some period of time and still remain valuable in exchange,
it would not solve the double coincidence of wants problem and therefore would not be
adopted as a medium of exchange. As a store of value, money is not unique; many other
stores of value exist, such as land, works of art, and even baseball cards and stamps.

Money may not even be the best store of value because it depreciates with inflation.

However, money is more liquid than most other stores of value because as a medium of
exchange, it is readily accepted everywhere.

Furthermore, money is an easily transported store of value that is available in a number of

convenient denominations.

Money as a store value has the following advantages:

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It was very difficult to store wealth in terms of goods because of their perishable nature and
high cost. Money provides a solution to this problem as one can store money for as long as
possible.

Money has the quality of universal acceptability. Therefore, one can at any time use money
in exchange for goods and services.
Money is easily portable, and saving money is much easier and more secure than saving
goods for future use.

Unit of account. Money also functions as a unit of account, providing a common measure of
the value of goods and services being exchanged. Knowing the value or price of a good, in
terms of money, enables both the supplier and the purchaser of the good to make decisions
about how much of the good to supply and how much of the good to purchase

2. Measure of Value

As a measure of value money works as a common parameter, in which the value of every
good & service is expressed in monetary terms.
This function of money helps in maintaining the business accounts, which would be
impossible otherwise.
It helps in determining the relative prices of goods & services due to this, it is also known as
a Unit of Account. For example, In India, Rupees is the unit of account, in America, it is
Dollar, etc.

By limiting the value of all goods & services to a single unit, it becomes very easy to find
out the exchange ratio between them and to compare their prices.
For example, the value of every product is estimated in monetary terms. The value of 1 egg
is estimated at ₹ 6 in India, and the value of a packet of bread is around ₹ 45. So, money
works as a measure of the value of all goods & services and is the amount that is required to
be received or paid during the transaction. Therefore, it is one of the most essential functions
of money.

3. Standard of Deferred Payments

The Standard of deferred payments states that money act as a “standard of payment”, which
is to make in the present or in near future. On a daily basis, millions of transactions are made
in which payments are not made immediately. Money encourages such transactions and
facilitates capital formation & economic development of the nation. This function of money
is important because:

It leads to the creation of financial institutions.

It simplifies the borrowing and lending operations.
For example, if someone borrows a certain amount from another person, they need to repay
the amount to that person with interest. With money as standard payment, it is easy to pay
the interest or make deferred payments. This has led to an increase in lending and borrowing
transactions and has contributed to the formation of financial institutions.
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To summarize, money has taken many forms through the ages, but money consistently has
three functions: store of value, unit of account, and medium of exchange. Modern economies
use fiat money-money that is neither a commodity nor represented or "backed" by a
commodity. Even forms of money that share these function may be more or less useful based
on the characteristics of money.

point of view about the future of money in Egypt

In Egypt, the currency is expected to depreciate to around 55-60 Egyptian Pounds per US
dollar by the end of 2024, helping to narrow the gap with the black market. By 2050, GDP is
projected to surge by 642%, with GDP per capita reaching over USD 20,000, driven by a
growing population with increased affluence and urbanization. The future of money in Egypt
leans towards digitalization, with more adoption of mobile wallets, digital banking, and
possibly cryptocurrencies. Egypt's Vision 2030 focuses on economic diversification, aiming
to reduce reliance on sectors like tourism and expand into technology and renewable energy
for a more resilient economy.

The Egyptian economy has faced many challenges in recent years

including a two-time devaluation of the Egyptian pound, having inflation and a foreign-
exchange crunch, which has resulted in restrictions on credit usage in foreign currencies.

Early Beginnings (3rd millennium BC):

Commodity Money: Ancient Egyptians primarily relied on a commodity-based system, with

gold serving as the primary form of currency. This gold was standardized in weight for
consistent value.

Pharaonic Period (up to 31 BC):

Predominance of Gold: Gold remained the dominant form of currency throughout this
period, facilitating large transactions and tax payments.
Barter System: Barter likely co-existed for everyday transactions, with grains, livestock, and
other goods used for exchange.

Greco-Roman Period (332 BC - 30 AD):

Introduction of Coins: The Ptolemaic rulers ushered in a new era by introducing minted
coins from precious metals like gold and silver. These coins facilitated easier and more
widespread exchange.

Roman and Byzantine Rule (30 AD - 641 AD):

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Roman Coinage: Roman rule saw the widespread adoption of their coinage system. These
coins were made from various metals, catering to transactions of different scales.

Islamic Period (641 AD - Present):

Dinar and Dirham: Following the Arab conquest, the Islamic dinar (gold) and dirham (silver)
became the standard currencies used in Egypt.
Ottoman Era: During Ottoman rule, various coins, including the Egyptian piastre, circulated
as legal tender.

Modernization (19th - 21st Century):

Egyptian Pound: A significant shift occurred in 1834 with the establishment of an Egyptian
currency based on a bimetallic standard (gold and silver). This led to the minting of the
Egyptian Pound in 1836.
Banknotes: The National Bank of Egypt's establishment in 1898 marked a turning point. It
began issuing banknotes convertible to gold in 1899, introducing paper money into the
Egyptian system.

Fiat Currency: By 1914, Egyptian banknotes became the official currency, transitioning the
system to fiat money (not backed by physical gold).
Modernization: Since then, the Egyptian Pound has undergone various design and security
feature upgrades, with the Central Bank of Egypt managing its issuance.

References :

-Britannica money

-https://www.investopedia.com/insights/what-is-money/

- https://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm

-Thoughtco.com

-SocialStudiesforKids.com

-https://study.com/academy/lesson/money-definitions-and-basic-functions.html

- IRENA ASMUNDSON AND CEYDA ONER

-https://www.studysmarter.co.uk/explanations/macroeconomics/financial-sector/money-
definition-and-function/

-https://www.cliffsnotes.com/study-guides/economics/money-and-banking/functions-of-
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money

-https://www.geeksforgeeks.org/functions-of-money/

-https://www.cbe.org.eg/en/banknote/banknote-issuance/banknote-history

-https://www.aucegypt.edu/news/examining-egyptian-economy