Money & Functions of money

 Money is the set of assets in the economy that people regularly use to buy goods and services from other people. The cash in your wallet is money because you can use it to buy a meal at a restaurant or a shirt at a clothing store.

 To an economist, money does not refer to all wealth but only to one type of it: money is the stock of assets that can be readily used to make transactions. Roughly speaking, the dollars in the hands of the public make up the nation’s stock of money.

 Functions of money

Money plays different types of significant roles in modern production system and social lives.

While describing the functions of money, the poet says,

'the thing that measures exchange and value

Paying the loans and savings,

Everyone knows that, Money it is'

 

The following two lines of an English poem refers to the functions of money-

"Money is a matter of functions four; A medium, a measure, a standard, a store." This means that, money has four functions. Those are: medium of exchange, measure of price, means of savings and standard of delayed or postponed transaction.

 Below is a description of the four major functions of money:

 Medium of exchange:

Transaction is done through exchange of money as money is acceptable to everyone. A salesman takes money in exchange of things and a customer buys thing by paying money. In this way, by exchanging money anytime any product or service can be purchased. For that reason transaction becomes easy and fast. So, it can be said that money is the easiest and the most convenient medium of exchange.

 Measure of price:

The way meter measures length and kilogram measures weight, money is also used as the scale to measure the price of product and services. For example, Amir buys a book with 50 taka. Here, 50 taka is the assessor of price of that book. Through money, we can easily measure the price of product and services and we can also make comparisons between the former and upcoming price of product and services.

 Means of savings:

Savings cannot be built through products as most of the products are perishable. On the other hand, service is a living item for consumption so industry and services cannot be stored. But the price of these kinds of products and services can be stored by money as everything can be exchanged through money. Nowadays people can save their surplus after subtracting the consumption cost from the production wages because saving through money is more secure and comparatively stable.

 Standard of delayed or postponed transaction:

Delayed transaction refers to future dealings. The calculation of these dealings is done through money. Moreover, taking and returning loan by money is more appropriate. As a result, economic activities can be done without any hindrance. At present, most of the business transaction cheques, bank drafts, exchange bills etc. are finalized through debentures. The bank circulates these debentures on the basis of the cash saved as fixed deposit. Thus, money is considered to be the basis of loan and the standard of delayed transaction. Apart from the above mentioned tasks, money also works as price transmission medium, standard of liquidity and symbol of social status. These roles of money are not different; rather one has been arisen from another. Hence, it is said that the economic development of the society has become easily accessible because of the functions of money.