Wednesday, July 28, 2010

Money Matters

Money is a commodity,metal or even a piece of paper,which is generally acceptable in final payment of dues. It is a thing which is universally accepted in the economy in exchange for commodities and services. Money performs many functions,e.g,it serves as a medium of exchange,it is used as a store of value,it is used as a standard of measuring values,it serves as a standard of deferred payment,it is used for transferring values.
In ancient times,pieces of gold,silver and precious stones were used as money. In primitive societies,even tusks plumage of birds,tiger teeth,etc were used as money. But now-a-days,notes and metallic coins,issued either by the government or by the central bank of the country are the most common forms of money. Thus money can be classified into two categories.-
1.Cash money.
2.Bank money or credit money.
Cash money includes currency and coins while bank money consists of cheques,drafts,bills of exchange,etc. In fact bank money is the creation of cash money. The value of money refers to purchasing power. Money value cannot be expressed directly,therefore,it is expressed in terms of goods and services that a unit of money commands. As a general rule,when the prices of goods and services increase the value of money decreases and vice-versa.

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