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Money in The Nation's Economy
Money in The Nation's Economy
Money in The Nation's Economy
MONEY IN THE
NATIONS ECONOMY
MONEY
The objects that was used in the creation of money were tobacco in continental Virginia, cattle in ancient Persia, iron in China as well as in ancient Greece, lead for Burma, cowry shells for India, metal in the Philippines and copper by ancient Hebrews. The commodity chosen by different countries as their medium of exchange was influenced by climatic conditions, locations of the community, degree of cultural development. With the development of trade, silver was the commodity used by China and India, Greece and Rome and the rest of European countries.
significance of coinage
The first step toward the system of coinage took place when the practice of cutting the metal into pieces of a fixed weight developed. When made in the form of a coin, money becomes not only a convenient commodity for comparing and storing values but moreover, it becomes the symbol of the State. A coin is merely an ingot of metal, of which the weight and fineness are certified by the integrity of the designs upon its surface. The purpose of a government monopoly in the minting of coins is to ensure the uniformity in weight as well as fineness of coins, thereby ensuring the presence of stability in the countrys monetary system.
functions of money
Accordingly, money is generally described as anything which is used as a medium of exchange and is widely acceptable for the payment of goods and services without reference to the general standing of the person who offers it. From the above definition, it appears quite clear that the basic function of money is to facilitate exchange transaction of goods and services. However, in the performance of such basic function, money has been observed to discharge the following incidental functions: 1. As a medium of exchange. 2. As a unit of account (measure or standard of value). 3. As a store of value. 4. As a means of deferred payment.
(3) Divisibility. Since exchange transactions vary in value from a few centavos to tens, if not hundreds or thousands of pesos, the circulation of money in various denominations becomes imperative. (4) Malleability. The material should lend to the minting process. It should be capable of being stamped with a proper design and, moreover, sufficiently durable to maintain its form and quality for an indefinite period of time. Last but not the least, it must be elastic. (5) Convertibility. Not to be glossed over is another important characteristic of good money. Such attribute enables money to be convertible, that is, exchangeable in terms of its equivalent In other money.
kinds of money
Basically there are 2 types of modern money namely: (1) metallic money and (2) paper money. Their titles express what they actually mean. Thus, metallic money is a special type of commodity money in which some metal, as for instance, gold or silver is used. On the other hand, paper money used in the form of bills and notes. They may or may not be backed up by a particular commodity. While there is no single acceptable classification of money, nevertheless, 3 important kinds may be noted: (1) commodity money, (2) credit money and (3) fiat money.
Clearly then, standard money establishes the value of all kinds of money and, therefore, represents a common denominator into which the values of all other money may be safely expressed or reduced. The value of credit money is therefore essentially equal to the value of standard money, provided of course, that no expense, delay or other difficulties are encountered in its redemption. However, from the moment certain obstacles are placed or encountered in the process of redemption, the value of credit money will depreciate in terms of standard money.