Essence and functions of money

Essence and functions of money

Money is the only goods which are used only for that to get rid of it. Money they do not give any benefits, only means for receiving goods and services. Money is an international language of the market of the whole world, it puts all circulation of resources and goods in action. The essence, functions and a role of money in the global goods turnover have a huge impact on formation and development of economy in general and in single countries. For this reason there was a need to carefully study essence of function and types, such ingenious opening as money.

Essence of money

Money is the most active element of economy, the most important part of economic activity, a link between participants of the market and production. Money has property of exchangeability on goods, including the real estate, jewelry and works of art. This property at direct exchange of goods, i.e. barter is especially noticeable.

Functions of money

If to consider functions of money within the country, then it is possible to call the following:

  • money is a measure of value;
  • money is means of payment;
  • money is currency;
  • money is means of accumulation.

If to be beyond economy of one country, then there is the fifth function of money – world money which consists of all above-mentioned.

Types of money

There are 3 main types of money:

  • bill;
  • check;
  • banknote.

But money, their essence, functions and types constantly evolve therefore there were modern types of money, such as electronic money and credit cards.

Essence and functions of money as uniform concept of economy

When the mankind invented money, their emergence generated desire to study their essence and functions because money began to develop and change actively from the moment of the emergence. The economic essence and functions of money form the basis of the market relations and also economies in general around the world. Below we will in more detail consider influence of these factors on economy:

  1. The essence and functions of money are visible when pricing of goods. In the conditions of market economy they (prices) are formed on the basis of the cost of goods, indicators of demand, the offer and also the competition are considered. Thanks to these indicators the producers can reduce the prices of goods. Money plays also large role in the course of money turnover, at the same time functions of money as means of payment and addresses reveal. The buyer controls the prices and quality in the market, buying goods, thereby forcing producers to increase quality of products all the time and to reduce the prices for it.
  2. In various market conditions the essence, functions and a role of money constantly change. In market economy the value of money considerably increases. The sphere of their application extends at privatization of the real estate, including the enterprises and property.
  3. Economy, having studied essence and functions of money, has an opportunity to define total costs of production for each products, the total volume of costs and also to receive results of production, proceeding from the prices of each type of products, volume and the got profit.
  4. Money has a huge impact on economic activity of the enterprises and functioning of bodies of the state. They increase interest of people to develop and increase production efficiency, and knowledge in the field of essence and functions of money allows to save resources rationally.
  5. Reasonable use of knowledge of essence, functions and role of money in economy, give the chance not only to use money, but also to coordinate monetary income, expenses that as a result leads to an economical expense of means. It is important to use steady currency since on it impact of inflation is not big.

Thus, the essence, forms and functions of money play a huge role in economy of each country and in the international relations, they allow to define benefits of export and import of goods and convenient calculation between the countries (non-cash payment by credit money).

Author: «MirrorInfo» Dream Team