MONEY

Money as a Medium of Exchange
- Fundamental role in economic systems as a means of payment.
- Quality of general acceptability; facilitates the exchange of goods and services effortlessly.
- Overcomes the limitations of the barter system, such as the double coincidence of wants.
- Transactions are divided into sales and purchases, promoting specialization among individuals and firms.
Money as a Measure of Value or Unit of Account
- Acts as a unit of account, measuring the value of goods and services.
- Simplifies comparison between various goods and services; facilitates price systems and financial records.
- Provides a language for economic communication via monetary units (e.g., rupees, dollars).
- Allows businesses to calculate profit and loss, national income, and manage accounts effectively.
- Struggles with fluctuations in value, affecting its role as a reliable measure.

Money as a Standard of Deferred Payments
- Useful for settling debts/later transactions, provides stability in borrowing and lending.
- Challenges include fluctuations, affecting debt obligations over time.
Money as a Store of Value/Purchasing Power
- Unlike commodities, money retains purchasing power over time, enabling capital accumulation necessary for economic growth.
- Offers liquidity, allowing easy conversion into other marketable assets.
- Value deterioration can lead to losses if not stable.

Basis of Credit
- Money's presence is crucial for circulating credit instruments like checks and bills of exchange.
- Banks require adequate cash reserves to issue credit; underlying monetary stability is essential.
Facilitates Distribution of Social Income
- Simplifies the task of distributing social income compared to barter systems; production cooperatively valued and paid in money.
Equalizing Marginal Utilities and Marginal Productivities
- Helps consumers maximize utility from their spending by comparing prices expressed in money.
- Enables producers to achieve maximum output for minimum cost by understanding the monetary value of marginal productivities.
Increases Productivity of Capital
- Money as the most liquid form of capital allows for efficient allocation to productive uses as required.

Maintaining Repayment Capacity
- General acceptability means firms and banks need to keep liquid money for meeting obligations and repayments.
Represents Generalized Purchasing Power
- Allows users to deviate from original purpose of savings; money adapts with fluctuating objectives.
Gives Liquidity to Capital
- Money can be quickly transformed into various assets; liquidity aids functioning of the capital market.
- Keynes identified three motives for holding liquid capital: Transaction, Precautionary, and Speculative motives.

Static Functions: Facilitate the economy's operation (e.g., medium, measure, store).
Dynamic Functions: Influence economic activity levels, such as credit expansion affecting income, output, and employment.

Traditional Approach:
- Seligman: "Money is a thing that possesses general acceptability."
- Walker: "Money is what money does!"
- Newlyn: "Anything that is generally accepted as a medium of exchange acts as money."
- Friedman: "The sum of currency plus all adjusted deposits in banks is money."
- Gully-Shaw: "Assets held by intermediaries closely substitute money."