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Money is a means of liquidity





Money is a store of value

Money is a measure of value or a unit of account

Money is a medium of exchange

Firstly, money is the mechanism that enables parties to make an indirect exchange of goods and services. In a money economy, if you want to buy or sell something, you don’t need to find someone who has what you want and who wants what you have. Money effectively eliminates the problem of a double coincidence of wants by serving as a medium of exchange. It is easily accepted in all transactions, by all parties, regardless of whether they desire each others’ goods and services. What is important, moneytransmits value through space. In a barter system, this is very difficult because transfer of large items and perishable goods makes moving around rather problematic.

Secondly, money is the benchmark for measuring value of goods and services. If you want to buy a mobile telephone, you don’t need to calculate how much tobacco or honey will be necessary to buy it. Instead, you see the product’s price, set in terms that everyone can understand, and you immediately know how cheap or expensive it is, comparing that value to other products.

Thirdly, money acts as a store of value for future use or for storing wealth. By saving money, you are able to spend some now and some later. In this way money transmits value over time. This couldn’t occur in a barter economy because not all commodities could be stored for future use. Some items wereperishable and subject to decay while others might die. Food items, expensive spices, fine silks, oriental rugs, etc. could not be suitable for use as money.

Note: In the time of high inflation or political instability, money may not be a good store of value.

In addition to these three functions of money, economists often point out the fourth criterion – a means of liquidity. Liquidity describes the ease with which an item can be traded for something that you want, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. It has a big advantage over other assets. It can be used immediately to purchase goods and services while converting gold, diamonds, or a house into cash takes time and effort. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.



In a modern society, money has several basic characteristics:

· Portabilityortransportability. Modern money is portable. It can be

easily carried from place to place. Paper money has proved highly convenient in this regard.

· Divisibility. Money can be divided into small units without destroying its value so as to make large and small transactions.

· Durability. Money is long lasting, able to withstand the wear and tear in changing hands. A good illustration of the durability of money is the fact that money left in pockets withstands the wash. Coins are often made with ridges around the rim to prevent coin shaving or debasement.

However, it is not only the physical durability that matters. Of no less importance is its social and institutional durability. People are willing to accept money in payment for one good because they are confident that they can use it at a later time for some other good or service. It works as a medium of exchange precisely because it stores value from one transaction to another. And this requires durability. While government-issued paper currency might remain physically intact for centuries, its ability to function as money depends on the institutional durability of the government.

· Stability. The value of money must be more or less stable over long periods of time so people do not lose its purchasing power if they use their money at a later time.

· Recognisability and acceptability.The most essential attribute of money is its quality of being easily recognised and readily accepted as a medium of exchange.

· Relative scarcity. For the purpose of controlling the money supply,money must be scarce but not too scarce.

· And finally, the monetary item must be difficult to counterfeit.

Money that is easily duplicated ceases to be a medium of exchange.

Modern money takes two primary forms: cash,which is paper currency and metal coins, and cheques(Am. checks). Banknotes and coins are commonly used for small person-to-person transactions. Cheques, debit cards and wire transfers are used as a means of transferring larger amounts of money between bank accounts more easily. Electronic money is non-physical currency that is traded and used over the Internet. The percentage of money moved electronically is growing dramatically these days.

To summarise, money is any commodity or token used by society as a medium of exchange, a measure of value and a store of value. The invention of money is probably one of the most important inventions in the world. Money helps to bring simplicity and organisation to our economy. Without the use of money, trade would be reduced to barter. Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services. Thus, money may be regarded as a keystone of modern economic life.

Despite predictions of a "cashless society" relying on electronic payments, the public demand for currency continues to grow. Debit cards used for purchases and transaction records could greatly reduce the need for cash, but paper currency still has the advantage of privacy. Will the present forms of currency last or change eventually? Only time can give the answer.

 

Language notes:

As time went by and society advancedthe volume and rangeof goods and services …– У силу того, як час ішов і суспільство розвивалось, обсяг і асортимент товарів і послуг …

 

It was money thatsolved the basic problems… – Тільки з виникненням грошей вдалося вирішити основні проблеми …

Зворот ‘It is … that’ використовується для того щоб виділити найбільш важливе в реченні, надати йому більшу емоційність. При перекладі зазвичай використовують слова «саме», «це», «тільки» .



 

The oldest recorded useof money dates back to ancient Mesopotamia ... – Історично, перше використання грошей зафіксовано у давній Месопотамії ...

Whatever the type of money, it should be judged on how well it … – Якого б виду не були гроші, оцінювати їх потрібно за тим наскільки добре вони …

 

Despite predictions ofa "cashless society"relying on electronic payments, the public demand for … – Незважаючи на прогнозування «безготівкового» суспільства, яке засноване на системі електронних платежів, попит на …

 

hasthe advantage of privacy… мають перевагу конфіденційності;

without having to barter – … не використовуючи бартер;

a prime example – відмінний/чудовий приклад

 

cowrie –a small yellowish-white shell with a fine gloss, used by various peoples as money. It is abundant in the Pacific and Indian oceans, and is collected in the Maldives and the East Indian islands, in Siam, and on parts of the African coast. It was used in China as a medium of exchange in primitive times, and also in Bengal. It is still so employed in Africa, and in the countries of Further India.

 

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