Characteristics of money, Managerial Economics

Characteristics of Money

Over time, therefore, it became clear that for an item to act as money it must possess the following characteristics.

  • Acceptability

If money is to be used as medium of exchange for goods and services, then it must be generally accepted as having value in exchange.  This was true of metallic money in the past because it was in high  and stable demand for its ornamental value.  It is true of paper money, due to the good name of the  note-issuing authority.

  • Portability

If an item is to be used as money, it must be easily portable, so that it is a convenient means of exchange.

  • Scarcity

If money is to be used in exchange for scarce goods and services, then it is important that money is in scarce supply.  For an item to be acceptable as money, it must be scarce.

  • Divisibility

It is essential that any asset which is used as money is divisible into small units, so that it can be used in exchange for items of low value.

  • Durability

Money has to pass through many different hands during its working life.  Precious metals became popular because they do not deteriorate rapidly in use.  Any asset which is to be used as money must be durable.  It must not depreciate over time so that it can be used as a store of wealth.

  • Homogeneity

It is desirable that money should be as uniform as possible.

Posted Date: 11/28/2012 6:53:08 AM | Location : United States







Related Discussions:- Characteristics of money, Assignment Help, Ask Question on Characteristics of money, Get Answer, Expert's Help, Characteristics of money Discussions

Write discussion on Characteristics of money
Your posts are moderated
Related Questions
What is the difference between a movement along a demand or supply curve and a shift of one of these curves? Why is it important to distinguish between the two? What mistake migh

A firm is employing 100 hours of labor and 50 tons of cement to produce 500 blocks. Labor costs Rs 4 per hour and cement costs Rs 12 per ton. For the quantities employed MPL = 3 an

Explain the concept of externality in economics? Give one example of a positive and a  negative externality in Australia.

CONTRACTING AND INSIDER-OUTSIDER MODELS OF UNEMPLOYMENT   From  the  Walrasian  assumption  of  a market-clearing wage  on  efficiency considerations  -  it was  postulated  th

How does economic theory contribute to managerial decisions?

a)      In 1948, the money GNP was $520 billion and the price index was 120.  In order to   make the 1948 GNP comparable with the base year, the 1948 GNP must be adjusted    to:

Takes the help of macroeconomics Managerial economics incorporates certain aspects of macroeconomic theory. These are important to comprehending the circumstances and environme

Problem 1: (a) Distinguish between political and partisan monetary cycles on inflation and unemployment rates. (b) In the rule versus discretion literature, explain how dy

Like supermarkets, full-service department stores like Macy's are mainly in decline. What factors may these types of stores have in common behind their declines? How would you veri

CENTRAL BANK A modern central bank performs so many functions of different nature that it is difficult to give any brief yet accurate definition of a central bank. Any definiti