Community Forex Questions
What functions must a currency fulfill to be money?
Since ancient times, it has been established that for a currency to be considered money, it must fulfill four functions. These are as follows:
Measure of value:
This function, also known as a unit of account or a price standard, is defined as the simplification provided by money when it comes to:
determining the cost of goods and services
This role of money allows for the development of an economy of the level of complexity we have today. We can do the following by owning a unit of account:
Lower transaction costs
Limiting the number of prices in a market
Transaction facilitation
Exchange instrument:
Money serves as a medium of exchange in this capacity. It is the key point in distinguishing money from the rest of an economy's financial assets.
Money, in various forms such as cash or bank deposits, is used in the purchase and sale of goods and services without regard for its acceptability as a form of payment for the obligations incurred in these transactions.
Its use as a medium of exchange solves economic efficiency problems by eliminating costs associated with the exchange of goods and services. Money, once again, simplifies business interactions.
Means of payment:
Money serves as a medium of exchange in this capacity. It is the key point in distinguishing money from the rest of an economy's financial assets.
When money is introduced into the circuit of mercantile transactions in cash or in cash, it acts as a medium of exchange. When money enters the credit circuit and is used to pay off debts contracted there, it fulfils the functions of a means of payment.
We've all heard that credit is critical to a society's overall development. This instrument provides the necessary means for receivables to be estimated and then cancelled.
Reserve of value:
The fourth and final function of money is found when we count on the fact that their purchasing power or purchasing power will not have diminished after being stored for a long period of time. When we look at the levels of inflation throughout history, we can quickly conclude that money is not a store of value. Various financial and nonfinancial assets excel at this role. BTC or ETH may logically attack our thoughts.
Measure of value:
This function, also known as a unit of account or a price standard, is defined as the simplification provided by money when it comes to:
determining the cost of goods and services
This role of money allows for the development of an economy of the level of complexity we have today. We can do the following by owning a unit of account:
Lower transaction costs
Limiting the number of prices in a market
Transaction facilitation
Exchange instrument:
Money serves as a medium of exchange in this capacity. It is the key point in distinguishing money from the rest of an economy's financial assets.
Money, in various forms such as cash or bank deposits, is used in the purchase and sale of goods and services without regard for its acceptability as a form of payment for the obligations incurred in these transactions.
Its use as a medium of exchange solves economic efficiency problems by eliminating costs associated with the exchange of goods and services. Money, once again, simplifies business interactions.
Means of payment:
Money serves as a medium of exchange in this capacity. It is the key point in distinguishing money from the rest of an economy's financial assets.
When money is introduced into the circuit of mercantile transactions in cash or in cash, it acts as a medium of exchange. When money enters the credit circuit and is used to pay off debts contracted there, it fulfils the functions of a means of payment.
We've all heard that credit is critical to a society's overall development. This instrument provides the necessary means for receivables to be estimated and then cancelled.
Reserve of value:
The fourth and final function of money is found when we count on the fact that their purchasing power or purchasing power will not have diminished after being stored for a long period of time. When we look at the levels of inflation throughout history, we can quickly conclude that money is not a store of value. Various financial and nonfinancial assets excel at this role. BTC or ETH may logically attack our thoughts.
Nov 11, 2022 18:57