Nature and functions of money , Managerial Economics

Nature and Functions of Money

The concept of money is very difficult to define . it is belongs to the category of things which are not amenable to any single definition. It is partly so because in the economy money performs not one but four important functions with each function providing criterion of moneyless and partly because these criteria are satisfied in different degrees by different assets. Since moneyless is at best a matter of degree, it is possible to draw only an arbitrary dividing line between money and other non money assets. Money is only one among many kinds of financial assets which consumers business firms government and other economic units hold in their assets portfolios . however the economists emphasis on money per se is justified because unlike the other financial assets savings deposits , government and corporate bonds money is the essential ingredient in conducting most of the economic transactions in the economy . furthermore, the demand for money ,like that for an input is a derived demand.

Money is a species of a large genus one among the class of things which perform monetary functions in the economy. Some goods perform all the four essential monetary functions act as a unit of account ,m a medium of exchange, a store of value and a standard of deferred payments and no other e.g. paper currency while other goods perform one or more monetary and non monetary functions in the economy. clarifies the position. A is the class of things which perform one or more monetary functions in the economy while B is class of things , included in A which perform all the four monetary functions in the economy .it is easier to understand what money consists of than to give any universally acceptable definition of money. As Harry G. Johnson has rightly stated the definition of money is one of the three unresolved issues sin the monetary theory. Consequently, ecortomists have been in open disagreement on the issue of defining money .

Posted Date: 12/1/2012 4:52:45 AM | Location : United States

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