We explain what money is, why it is used globally as a means of payment and what its main characteristics are.
What is money?
Money is a type of asset that conventionally has as its main function, to serve as a means of payment and has thus been accepted by the economic agents of the world. This has served us and continues to serve us as a great facilitator of commercial exchange operations. In this way, it allows us to access and purchase different types of goods and services.
It is possible to speak basically of two types of money: the metallic, also called currency and that has low value ; and the paper or also known as banknotes which is made in a special type of paper whose monetary value is greater than the first and shows it in printed form.
Characteristics of money :
1. Universal value
Each banknote or coin has an established and assigned value, which is thus universally accepted.
2. Its value depends on supply and demand
The more money is offered and the less is needed, the less it will be worth ; while if more money is needed than there is in circulation, the difficulty of accessing it will determine an increased value.
3. Its value is opposite to the price of the products
If there is a lot of money in circulation, it is very easy to access it.
In the same order of the previous point, this is related to the fact that if there is little supply of any currency , it is more difficult to access it, and therefore it will have a higher value, with the price of the products considered: low. On the contrary, if there is a lot of money in circulation, it is very easy to access it, and the amount you have to pay for a product will be greater.
4. Your demand fluctuates according to the economy
Following the sense of the previous characteristic, if there is a growth of the economy , from the point of view of an increase in the supply of goods and services offered, more money would be needed to circulate to be able to acquire them , and this undoubtedly translates into a increase in the demand for money.
5. The offer depends on the government of each nation
So far we have seen that the amount of money in circulation is very important and even decisive, and the only one in charge, in each country or nation of determining this aspect, is the government and the policies by which it is governed.
5. Supply and demand also determine inflation
There is inflation when money loses its real value and prices increase.
Inflation, or high inflation rates, appear when there is a large supply with little demand , since an excessive amount
7. Serves as a universal means of payment
Money has been established as a global medium of exchange for better political and economic purposes and to avoid the old bartering.
Here are more money features:
8. It is a unit of change
Money allows us to facilitate economic procedures.
In accordance with the previous point, money has served us, for many years, as a unit to establish the value of an object , and thereby facilitate the economic procedures that this would entail.
9. It’s a store of value
This means that with money you can acquire another good that can be acquired with the purpose of serving us as a future object of exchange, conserving in the same way its commercial value.
10. It has no use limit
Although this may seem over-understood, it is important to clarify that the coins and / or bills do not have any use limits , as long as they are under legal transactions.
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