MoneyActs

<em>Money</em>Acts

Moneyacts as:

(1)A medium of exchange fundamentally it must be accepted in exchange for goods and set-vices, and give its owner the power to buy goods and services.

(2) A measure of value it must be able to be used to compare the values of goods and set-vices with one another by reference to the standard commodity, i.e. it must be able to serve as a unit of account.

A standard of deferred payments individuals who agree to receive payment at future dates must be assured that the value they will receive will not be less than at the time of the transaction. It is this quality of money which makes credit possible. The purchasing power of money is in practice rarely stable.

A store of value money must not deteriorate with time, and its holder should be able to retain it indefinitely for use for exchange.

The properties or qualities of money may be deduced from its functions: divisibility money must be divisible into convenient units of account; indestructibility it must not deteriorate with time or wear (few currencies meet this requirement); stability of value its value should not fluctuate widely over time; homogeneity all units must be of the same quality; recognizability to discourage counterfeits; portability it must have a high exchange value relative to its bulk (this attribute is less important the better developed the credit system). All these properties are implied in the central property of acceptability it artist be taken in exchange for goods and Services.

Moneymay take the torn of notes and coin of token or intrinsic value; but in the modem economy the total supply of money available exceeds the quantity of notes, etc., in circulation because of credit. Since credit is universally acceptable as a means of exchange and in settlement of debts, it too is money.

The value of money is measured in terms of what it will buy: if its value rises it will buy more; if its value falls it will buy less. Since the values of all commodities are expressed in prices, the value of money may be measured by the level of prices; if the level of prices rises, the value of money falls, as it falls, the value of money rises.

Movements in the general level of prices are indicated by index numbers of retail prices, commodity prices, capital goods prices, etc.

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