Money: functions of money. Types and functions of money
Money surrounds people everywhere. This is a specific product that serves as an equivalent for estimating the value of other goods and services. Everything can be exchanged for money. This is the only object that is created in order to get rid of it sooner or later. A kind of financial asset is used to make sales transactions. Without money, it is impossible to imagine life in a civilized society. But once they did not exist at all.
When did money circulation arise?
Money in its classic form arose spontaneously. Even in ancient times there was a commodity circulation. People exchanged things and food. When the surplus of goods arose, there was a need for a special asset that, upon admission to circulation, could be exchanged for a particular product. Money became such an asset. The main functions of money are precisely in circulation with the aim of exchanging goods between consumers.
Since long ago, absolute liquidity has been considered the main property of money. They can be fully exchanged for a product or service. At different times and in different countries, precious metals, feathers, cocoa beans, and cattle were used as money. Only over time, it became clear to people that it was better to make money with constant weight and in a certain form. Thus, the usual for many coins. Metal is most suitable for the manufacture of a financial asset. It was easy to process and had good wear characteristics. The types and functions of money changed over time. But their form has been preserved since ancient times. These are round coins or paper products.
The very first coins that were used as financial assets appeared in China in the 17th century BC. Money was made of an alloy of silver and gold. Functions of money was to exchange them for goods and services. Thus, barter was replaced by financial turnover. Paper money appeared much later, also in China. After all, it was in this country that paper first appeared. The first money was a receipt for precious metals and stones, which were handed over to special stores for storage.
Essence of money
Money is the main component of the economy of any society. Financial relations of representatives of individual countries could not be adjusted without a special asset. The solvency of an individual or society as a whole expresses money. The essence and function of money are closely linked. The main nature of financial assets is that they can be used to assess the quality and relevance of a particular product or service.
Today, money is the universal equivalent. With the help of barter, of course, you can get the necessary goods. But to accumulate assets will not succeed. It is not by chance that in ancient times a monetary circulation appeared, from which the division of society into classes began. Money is divided into poor and rich people. The types and functions of money determine the development of the society in which they rotate.
In a market economy, money and their functions are constantly changing. Exchange rates depend on the events that occur in a particular society, natural disasters. One type of money can be strengthened or fall in relation to another type. Despite this, the use of money is increasing every year.New types of financial assets are emerging. A vivid example can be electronic money, with which you can pay for the same goods and services or increase your capital.
The main types of money
All types of money can be divided into two large subgroups. These are commodity finance and symbolic. More specific types and functions of money may depend on the society in which they circulate. Based on the fact that they have arisen due to the need for commodity exchange, the main type is precisely commodity finance. Money is a product that is able to estimate the value of all other goods and services. For a long time, precious stones and metals were used as commodity money due to their properties.
Today, valuable money is used, the cost of which fully corresponds to the actual value of the metal. Metal coins are produced in various denominations. Thus it is much easier to pay for a particular product. The coin has established external features. Money is made in a certain form, with a specific pattern.
Commodity also includes paper money.The types and functions of money in this format are no different from coins. They were created to save metal. Paper is much cheaper. But in modern society it is almost impossible to fake paper notes. They are made in a special way by state-owned enterprises. High quality dyes and paper are used. The difference between the real and nominal value of paper money is huge. Due to this, the share premium of the state treasury is formed. Money can cover the budget deficit.
Paper financial assets have a special economic nature. They are almost always unstable. A permanent fixed rate cannot exist. The issue of money is not regulated by turnover. That is why inflation occurs.
The total amount of services received, contracts and liabilities - all of this is credit money. The essence, functions, types of this financial asset determines the agreement of the two parties. In any case, the essence of the loan is to return the money with interest. Credit finance can be issued in the form of banknotes, electronic money, bills or checks.
Separately, it is worth to provide credit cards. They represent the key to the bank account in which the money is held. The essence and function of money of this type are the same as that of other types of credit finance. The only difference is that the loan agreement is executed once. It is possible to withdraw money from an account an unlimited number of times within the limit provided by the bank. The only thing to do is to make a monthly minimum payment.
Money as a measure of value
Money is today the only instrument of economic relations in any society. The functions of financial assets cannot be realized without the participation of people. By setting prices, the cost of a product or service is determined. Simply put, the price is the value of a certain object in monetary terms.
Money performs ideally as a measure of value. In the modern world banknotes of various denominations are issued. Thanks to this, you can set the most accurate price of a product. Under these conditions, barter loses its relevance.
At the same time, the function of circulation of money as a measure of value is performed virtually.After all, in order to determine the value of the goods and hang a price tag on it, real funds are not needed. The seller sets the price on his own, in his mind. Similarly, in order to find out the value of a product or service, it is not at all necessary to have real money available. All you need to do is to study the price tag or price.
Measuring the cost of various services and goods can be compared with measuring the distance in meters. The monetary unit acts as a scale. This determines the value of individual resources, services and goods. Prices in a separate market can take shape under the influence of a huge number of contracts for the sale of goods and the provision of services. The more the demand for an individual object of the economy grows, the sooner its cost increases. It turns out that the main functions of money are closely linked. The functioning of financial assets as a measure of value can not be carried out without real money turnover. In this case, money acts not only as a medium of circulation, but also in the form of a means of payment.
Functions of money as a medium of circulation
Only real money can be used as a medium of circulation. Functions of money are the simultaneous circulation of goods and financial assets. The seller receives cash assets, and the buyer at the same time becomes the owner of the desired product. In this case, the transaction is considered genuine only if the relevant documents are available. When buying real estate or expensive objects is the contract of sale. In stores with small items used checks.
In the global economy, all the functions of money are important. The medium of circulation must be realized. If the seller does not conclude a contract with another commodity owner for the proceeds of finance, the money will lose its value. The crisis in the economy is generated by the gap in the chain of sale. It was the inability to realize the function of money as a medium of circulation became the impetus for the emergence of paper financial assets. The amount of money did not meet the need for financial circulation. In connection with this history, many cases of serious economic crises are known. In order for the function of the medium of circulation to be realized in full force, each commodity must be assigned a value equivalent to the weight part of one or another precious metal.
More correctly perform the function of money, as a means of circulation, metal coins. It should be borne in mind that today for the manufacture of coins using metal is not the highest quality. Money is erased, lose their original weight. In order for the money function to continue to be performed correctly, low-quality coins must be disposed of in a timely manner.
Money is a means of payment
For most people who do not understand the economic nuances, money performs the function of payment in the first place. In this case, the buyer may not necessarily pay for the goods immediately. The function will be implemented even if a loan agreement is made. Often there are cases when the goods have already been paid for, but the owner cannot use them (making furniture for the order). At the same time, money also acts as a means of payment. To pay taxes, rent housing, wages, employees also need financial resources. In this, the functions of money are expressed. The means of payment can be both real and virtual. Electronic money has recently become increasingly popular.People buy goods through the Internet, pay for services through special services. In this case, it is not at all necessary to have a certain amount of money in your wallet. The main thing is to open an account in the bank.
Another function of the economic crisis is connected with the function of money as a means of payment. This was especially true with the development of the credit sector. It often happens that the payer has no funds at the time of the end of the loan agreement. He cannot fulfill his financial obligations. Moreover, many commodity owners buy goods from each other on credit. The insolvency of one subject of the economy leads to the insolvency of another. A prime example is banking institutions. If one customer cannot repay the loan, the financial institution will not be able to return the deposit to another customer.
Money as a means of accumulation
Financial resources that are not involved in the turnover and are not used as payments may be the object of accumulation and increase of wealth. What functions are performed by money, people understood from ancient times. But it was not always possible to implement them correctly.In accumulating wealth, many simply devalued money. Inflation, the economic crisis, military actions can lead to the fact that huge wealth will lose its value.
To accumulate money at home is impractical. In antiquity, people kept treasures and gold coins in chests. Thus, the money lay without movement, withdrawn from the commodity circulation. To increase wealth in this way did not work. The one who does not keep money, and lets them in an economic turn correctly arrives. A reasonable entrepreneur who spends a certain amount on the development of their business, only multiplies the money. Functions of money as a means of accumulation, while implemented in full.
The accumulation of money today is a prerequisite for the development of any production. At the same time, the state functions normally, inflation does not hit the pockets of citizens. All money and their functions are closely linked. Finance - as a medium of circulation - can simultaneously be a means of accumulation. The main thing is to approach the issue of accumulating money wisely.
What is world money?
The development of the country is impossible without international economic relations. What functions the money carries out should be understood by all heads of state.In addition, each individual country can have its own currency. In the world market, many monetary units lose their power. If the state does not have high economic development, its currency will not be in demand.
In the international market, the most commonly used currencies are individual developed countries (US dollar). In addition, artificially created currencies can be used. A prominent representative is the euro. World money and their functions are closely related to finances that operate within a particular state. The only difference is that the cash flow occurs at the international level. In the international market, not only individual states, but also private organizations and structures can act as sellers and buyers.
Modern monetary system
Today, paper money is widespread. The functions of money determine the degree of development of a particular state. If they are fully implemented, the economic crisis can be avoided.
Modern paper money has its own distinctive features. First of all, it is the abolition of the gold content. Paper cannot act as a precious metal equivalent. Gold left the international settlement system.
The past few decades, the monetary system is characterized by a decrease in cash capital and an increase in the amount of electronic money. At the same time, gold today practically does not fulfill its monetary functions.
What functions of money would not be foreseen, they are necessarily regulated by the relevant government body. The financial condition of the country as a whole and its position in the international market depends on its work.