Functions of money

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2018-03-18 13:41:19

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Everyone knows that the function of money reflect their use. In fact, the money – is the same product that is exchanged for other goods, so they are the universal equivalent, serving the needs of their owners.

The Functions of money are different. One of them is a measure of value. The labour expended in the production of any commodity determines its value expressed in money is called price. To compare the prices of different goods, you need to bring them to a common scale, that is, to determine them the same monetary unit. A scale of prices for metal treatment called adopted for currency the equivalent weight of monetary metal, which is a measure of prices of various goods.

One of the most important is the function of money as a medium of exchange. In the process of direct trade purchase and sale coincide in time, and in this case, between them there is no gap. In commodity circulation there are two independent process, which in time separated. As a mediator, allowing the gap in space and time to be overcome, and to ensure the continuity of commodity production, the money. One of the features of money as a medium of exchange is their actual presence and also the short duration of participation in the exchange process. Paper money and credit, acting as inferior (relative to gold), can function as a cash equivalent.

Money is another not less important function: they act as a means of accumulation and savings. Money provide them to the owner obtaining the desired product and, at the same time, be an indicator of social wealth. Each person the desire for accumulation of funds. In the process of metal treatment extra money was set aside in the form of treasures, and their lack of replenished from there.

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In expanded commodity production above feature of money – it is a necessary condition of turnover of capital. Cash reserves to smooth various kinds of uneven economic life. At the state level there is a need for gold reserves, the value of which indicates the wealth of the country. This is maintaining the trust of residents and non-residents against national currency.

The Following function of money-payment. It is characterized by a unilateral monetary movement. With money made non-cash payments, payment of taxes and miscellaneous fees, the payment of salaries and pensions, scholarships and allowances. Significantly increased this role with the development of the credit system.

The Function of world money has become urgent with the development of the foreign trade communications, international borrowings, rendering of services to external partners. They are international payment and purchasing means a universal indication of the materialization of social wealth. Nowadays, such functions of money are often freely convertible currencies (previously – precious metals).

The Functions of money in the economy varied. With their help, the formation of prices. They are directly connected with the preparation and execution of the budget. Involving money is the implementation of the goods and services. Their use is determined by the cost of production and profit margin. Without money it is impossible the implementation of settlement and loan transactions, transactions with shares. Estimation of the volume of resources involved in the production process also takes place with the help of money. They arise as a result of certain conditions in economic relations and, in turn, contribute to their further development.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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