Money: Evolution

What is Money? Explain the different stages of the evolution of Money.

Money is anything that is generally acceptable as a means of exchange, measure and store of value.

The development of money has progressed through the following stages:

commodity money, metallic money, paper money, credit money, and electronic money.

Define and explain Money in detail. Elaborate the various/different functions of Money.

Money is anything that is generally acceptable as a means of exchange, measure and store of value.

Features of Money:

Primary Function:

1. Medium of Exchange: It is accepted as medium of exchange for the settlement of economic transactions.

2. Unit of Measurement: It is used as accounting measure for different services/things.

3. Store of Value: Money is the most liquid assets from all the assets therefore it is easier to store value in the form of money.

4. Legal Tender: It is used as legal tender for repayment of debts, wages, interest, profit etc after time lapse.

5. Pricing: It is used as standard in the development of pricing mechanism for economic activities

Secondary Function:

1. Instrument for Lending: People save money and deposit it in to banks. The banks advance these savings as loans to businessmen and earn profit by charging interest.

2. Instrument of Economic Policy: Money is an instrument of an economic policy of the government. Money is the powerful factor to achieve growth, reduce unemployment and maintain expansion of economic activity.

3. Tool to Monetary Management: Money helps in increasing output and employment. Money is also help in determining the distribution of wealth among the members of society.

4. Aids to Production and Trade: Barter difficulties can be solved with the help of money. It helps in the production of goods and services and facilitates expansion of trade.