#economics #money #banking

• Money -: Money is considered as a exchange for goods and service, as it widely accepted in mejority, it's a valuable resource that can purchase goods or service

• In the modern world society, money includes banknotes and coins, there are also exchanges for big amount of money through gold and bank account deposit

• Forms Of Money

  • There are 3 forms of money that exists - Cash, Bank Deposit And Central Bank Reserves

  • Cash -: Banknotes and coins are a physical way of money, while cash is important for certain transactions at the same time its risky and bad to use it for large transactions, In the UK 3% of the money is printed as cash

  • Bank Deposits -: Bank deposits deal with a big amount of money, these kind of money are placed at commercial bank accounts, these bank accounts would contain a really large amount of money and that is why people carry these kind of money in a electric form like credit card or debit card, they transfer money from one bank account to the another.

  • Central Bank Reserves -: These kind of bankes are used to save really big amount of money and ensure no demand is changed for the money

• Functions Of Money

  • Money acts as a medium of exchange -: money functions as a way to conduct trade. It is widely recognised and accepted as a means of payment for goods and services

  • Money ( Measured As A Value ) -: Money expresses the value of goods or service, It is far more efficient for trading purposes to express the price of goods and services in dollars

  • Money ( Store of value ) -: It can be stored and used at some time in the future. In other words, money must be able to hold its purchasing power over time

  • Money ( Used For Future Payments ) -: Money is used as a standard for future to pay off debt and loans, for examples loans taken out today can be paid off later

• Characteristics Of Money

  • Durability -: Money such as banknotes and coins should fairly be lasting for a really long time, a us dollar can be folded 4000 times until it tears out, According to the US Federal a 50 dollar and 100 dollar note can last for more than 9 years, coins survive for more than 30 years, modern day banknotes are made up of polymers and not paper

  • Acceptability -: Money is widely accepted and recognized as a medium of payment for goods and services, other forms of money are also accepted, gold is also a universal form of money, zimbabwe dollar are stopped using at 2009 as they are not accepted for there hyperinflation.

  • Divisibility -: As money is a measure of the value of goods and services, it must be divisible. Many economists and historians believe that cattle are the oldest form of money, with cows being used for trade as far back as 9000 BC.

  • Uniformity -: For money to be easily recognisable there must be uniformity. This means that all $50 banknotes will look identical in terms of shape, size and design. The same applies to all legal tender denominations of banknotes and coins. Cows come in many sizes and shapes and each has a different value; cows are not a uniform form of money. The first consistent form of money, cowry shells, was used in China over 3200 years ago. These seashells were used mainly for trading food, livestock and textiles.

  • Scarcity -: Money must be limited in supply in order to keep its value. Both seashells and salt have been used as money in the past, although the high levels of supply meant they soon lost much of their value as a medium of exchange. By contrast, silver and gold are better types of money due to their scarcity