Money

• Money is anything that is widely accepted or used in exchange for goods and services.
• The first form of money was commodity money, which were items such as gold, silver, salt, shells etc.
• The characteristics of money are

  1. Scarcity
  2. Acceptablity
  3. Portabilty
  4. Durability
  5. Divisibility
• Scarcity is when an item is valued because it is in relatively scarce supply
• Acceptability when the item is accepted as payment then serves as money
• Portabiliy when the item is easy to carry around
• Durability is when the item is hard wearing and long lasting
• Divisibility is when the item needs to consist of units so large suums can be broken down into smaller units
• The four functions of money are:

  1. Medium of exchange
  2. Unit of account
  3. store of value
  4. standard of deferred payments
• medium of exchange is when money is generally accepted as a form of payment
• Unit of account is when value is calculated in units of money. for example $1.00, $0.50 cents
• Store of value is when money can be saved for future use whulle retaining its value
• A standard for deferred payments is the value of a debt can be calculated in money now and then paid back in the future in terms of this value