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heoryofMoney
Money plays an important role in each and every activity of human beings. It is mostimportant invention of man so far. The history of money is one of epitome among thehistory of human civilization. It is very difficult to imagine a society or a world withoutmoney. Some will say “money makes many things.” In some context Marshall says that“Money is the pivot which the economic science clusters”.In the early stages of human civilization, the wants of men were simple. People wereself sufficient, however the human wants became multiple and the wants of man beganto increase. Since each family could not produce all the commodities so exchanges of goods against goods were necessary. This system of exchanging goods against goods isknown as barter system, different goods were exchanged for one another directly. Thisuse to result in lot of problems and inconvinence.Difficulties of Barter system;-1.problem of storage2.lack of common measure of value3.problem of division4.problem of borrowing and lendingDefinitions of moneyWe use money everyday, we have been using money since long time then also it is verydifficult to define money in one single sentence. The concept of money has been defined by different economistsAccording to crowther “Anything that is generally acceptable as a means of exchange”According to F.A.Walker “money is what money does”From the above definitions it is cleared that anything which is accepted by all as a meansof exchange and which carries the function as the medium of exchange is money.Usually, money is defined on the basis of functions it performs.Characteristics of moneyMoney as a medium of exchange has confined with certain special characteristic featuresthey are
 
1.it should be accepted by all2.it must posses durability3.the material used in money should be easily carried by all4.the money material should by capable of being divided into smaller parts withoutlosing its value stored5.money is used as store of value therefore, it should not be easily perishable6.Money should be scare in relation to its demand. Plentiful supply of moneycreates many problems.Functions of moneyMoney serves as a great source for the development of industry and commerce in theeconomy. As a medium of exchange money performs many functions. They can begrouped into three kinds1.primary functions2.secondary functions3.contingent functionsPrimary functionsThe primary functions of money are its basic functions which the performs as such thefundamental functions of money are as follows1. Medium of exchangeThe first and foremost function of money is it is the medium of exchange. Money can beused to purchase the goods and services. It has the quality of general acceptability; everycommodity can be bought and sold with the help of money.2. Measure of valueThe second important function of money is that it measures the values of all goods andservices. Money is, thus looked upon as a collective measure of values, since all valuesare expressed in terms of money it can be easily recognized the values of each goods andservices.2.Secondary functionsThe secondary functions of money are called derived functions because these functionsare derived from the primary functions1.store valueMoney is used as a store value. As money cannot be destroyed and its value iscompletely stable it can be stored for any number of days
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