Money: The Definition, The Functions, The Evolution and The Characteristics

What is money:

The first question is what is money. Money can be define as a medium of exchange, that is accepted as a means of payment for goods or services.

Money is widely used across the world as a means of payment, meaning it is important in the daily live of a person. Economies rely on money to pull transactions and to power financial growth. Money has worth as it is regarded as something really vailiable.

The Function of money:

Money plays a big role in the Economy of a country. Money acts as medium of exchange where it is accepted by both buyers and sellers.

It is a process whereby the buyer gives a seller money in exchange for a commodity. Money is used to exchange goods and services, it allows people and businesses to obtain what they need to live and thrive. Money also regulates the economy of a country.

The Evolution of money:

Before the evolution of money, barter trade was used as a medium of exchange. This a situation where people exchange one good for another good. Example of this is when a trader trades a some particular amount of bucket to get maybe a Goat. There was a central market and people could converge there with their items. This later brought up issues as most of the time the goods that's being exchange doesn't have any equality. Example of this is a situation whereby a person wants a Goat and the medium of exchange is just two buckets, the value of the two is not equal and this brought division. These types of problems made barter trade to be really hard as a means of transaction. Eventually people invented the use of commodity money like (Beads, shell, Skins and others) as a medium of exchange. Each territory came with unique items from their areas as a means of exchange and this was widely accepted. Then later metallic money evolved whereby people made use of durable items like Gold, copper as a means of exchange. Traders started using gold for exchange of goods and eventually it was accepted by almost everybody, as Gold has more value than any other metal. Traders would go to goldsmith and get commodities they wanted with respect to the quantity of their gold, then goldsmiths would value the metal then exchanging it with the respective quantity of item the trader needed. Goldsmiths started issuing traders with receipts that were used as medium of exchange, it then acted as a goldsmith bank because they kept these items for traders and provided individuals with receipts, which were accepted even by many people. During this process this gave rise to development of banks that started printing notes and providing coins. The Note and coins is what we make use of as a medium of exchange for goods and services today.

The characteristics of Money:

Money has a lot of characteristics, as it makes it easy for transaction. Money is made of durable items that stays for a very long time without deteriorating in value. Money carries a lot of value. Money symbolizes value. This allows money to be used as a means of exchanging goods and services.

NOTE

Money carries a lot of value as it ease transaction. It makes the transaction of good and services easy.

Komolafe Peter Adedayo

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