Essays On Money
Money is a wonderful invention of man. In the primitive-society human needs were simple and limited. In course of time ‘Barter system’ prevailed and commodity to commodity exchange came into existence. So, direct exchange of goods for goods is known as barter system. With the passage of time and growth of civilisation, human wants multiplied.
Paragraph About Money
ADVERTISEMENTS: Read this essay to learn about the meaning, functions and role of money. Meaning of Money: Money has been defined differently by different economists. Some, like F.A. Walker, define it in terms of its functions, while others like G.D.H. Keynes, Seligman and D.H. Robertson lay stress on the ‘general acceptability’ aspect of money.
According to Prof. Robertson, “anything which is widely accepted in payment for goods or in discharge of other kinds of business obligation, is called money.” Seligman defines money as “one thing that possesses general acceptability.” Prof. Ely says: “Money is anything that passes freely from hand to hand as a medium of exchange and is generally received in final discharge of debts.”.
ADVERTISEMENTS: Prof. Walker says “Money is that money does.” But these definitions are defective because they do not lay proper emphasis on all the essential functions of money. Crowther’s definition of money is considered better as it takes into account all the important functions of money.
ADVERTISEMENTS: (a) Primary functions also called fundamental and original functions like the medium of exchange and measure of value. (b) Secondary functions like standard of deferred payments, store of value and transfer of value. (c) Contingent functions like distribution of income, measurement and maximisation of utility etc.
Medium of exchange: Money serves as a medium of exchange and facilitates the buying and selling of goods, thereby eliminating the need for double coincidence of wants as under barter. A man who wants to sell wheat in exchange for rice can sell it for money and purchase rice. Measure of value: Money has also removed the difficulty of barter system by serving as a common measure of value. The values of various commodities are expressed in terms of money. Money as a measure of value has made transactions simple and easy. It may be understood that this function of money follows from the first basic function (medium of exchange).
It is because money is used as a medium to exchange goods, that each good gets a value in terms of money (called price). As such, money also serves as a unit of account. In India, the unit of account is the Rupee, in USA, the Dollar; in USSR, the Rouble and the Yen in Japan.
Store of Value: Classical economists did not recognize the store of value function of money. Keynes laid stress on this function of money. People store money to provide again the rainy day and to meet unforeseen contingencies.
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