What is Money?
#Money is a #universally accepted #medium of exchange used to #facilitate transactions, serving as a #store of #value and a unit of #account. It enables buying and #selling goods, #paying wages, and storing #wealth, taking forms like physical #cash (notes and coins) or digital #bank deposits. Its value depends on #trust and economic stability.
Key #Functions of Money
Medium of #Exchange: Facilitates trade, allowing for the easy purchase of goods and #services.
Unit of Account: Provides a standard, #measurable value for goods and services (e.g., pricing in dollars or pounds).
Store of Value: Allows #individuals to save value for future use without it decaying or losing value #quickly.
Main Types of Money
Fiat Money: Currency authorized by a government, such as paper notes and coins, which is not backed by a physical commodity like gold but by government decree and #public trust.
#Commercial Bank Money: Electronic money created by commercial banks, representing the vast majority of money in modern #economies (e.g., bank account balances).
Commodity Money: Objects that have value in themselves, such as #gold, #silver, or cowry shells.
Fiduciary Money: Relies on trust or a #promise of payment, such as #checks or #banknotes.
Characteristics of Money
Liquidity: Money is highly #liquid, meaning it can be immediately used for transactions, unlike assets like real estate.
Acceptability & Trust: Its functionality depends on the shared #belief in its value.
Durability & Divisibility: Money must be durable enough to last and easily divisible for different #transaction sizes.