MONEY AND ITS FUNCTIONS
Define money and describe its functions
Money is anything serving as a medium of exchange. According to Professor Walker he defined money as, ‘Money is that which money does.’
Functions of money
Money as the Medium of Exchange:
Money acts as a medium of exchange or as a medium of payments. Medium of exchange is the basic or primary function of money. People exchange goods and services through the medium of money. The use of money facilitates exchange and promotes specialization and increases productivity and efficiency. A good monetary system is, therefore, of immense utility to human society.
Money as a Unit of Account or Measure of Value:
Money is the units in terms of which the values of other goods and services are measured in. Different goods produced in a country are measured in different units. Without a common unit, exchange of goods becomes very difficult. Values of all goods and services can be expressed easily in a single unit called money.
Money as the Standard of Deferred Payments:
The use of money as the standard of deferred or delayed payments immensely simplifies borrowing and lending operations because money generally maintains a constant value through time. Thus, money facilitates the formation of capital markets and the work of financial intermediaries like Stock Exchange, Investment Trust and Banks.
Money as a Store of Value:
Wealth can be stored in terms of money for future. It serves as a store value of goods in liquid form. By spending it, we can get any commodity in future. Keynes places great emphasis on this function of money. Holding money is equivalent to keeping a reserve of liquid assets because it can be easily converted into other things.
Is money the root of all evil? Why or why not
I think it would be better to say that the root of all evil is not money itself but people’s desire for money, which they could use to improve their own status, either greed to increase one’s status, or jealousy over losing in the status game to others. The Bible does not say that money is bad. What it does say is that “the love of money is the root of all evil.” Now, those who have money are not always that happy, as they say “Money can’t buy happiness, but it can buy you the kind of misery you prefer.” They can never get enough of everything, they always seem to desire newer and better products which they think will ultimately make them happy. But money isn’t all that bad. Money is simply “anything that is generally accepted as payment for goods and services and repayment of debts.” Its main purpose is an instrument of exchange, helping to buy, sell and also in fixing a value on things.
How are paper money (fiat) and commodity money different
The value of fiat money is based largely on public faith on the issuer. Commodity money’s value is based on the material it was manufactured with such as gold. Thus fiat money has no intrinsic value while commodity money has.
How can paper money be validly used as money
In order to be used in a country, the printing of the money has to be regulated by the country’s central bank or treasury in order to keep the flow of funds in the monetary policy. The paper currency will then be updated with new versions that contain security features that will seek to make it more difficult for counterfeits to create illegal copies.
Are credit card money? Why or why not
A credit card is not money simply because it is an overdraft specified by the card issuer through which you can take a loan. Thus it is nothing but a medium to take a loan but not a legal tender itself. Hence credit cards are not money.
Are cryptocurrencies such as Bitcoin, Ethereun, Ripple, Litecoin, Monero, money? Why or why not? Discuss thoroughly.
Cryptocurrencies are systems that allow for the secure payments of online transactions that are denominated in terms of a virtual “token,” representing ledger entries internal to the system itself. “Crypto” refers to the fact that various encryption algorithms and cryptographic techniques, such as elliptical curve encryption, public-private key pairs, and hashing functions, are employed.
The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym, Satoshi Nakamoto. As of February 2019, there were over 17.53 million Bitcoins in circulation with a total market value of around $63 billion (although the market price of Bitcoin can fluctuate quite a bit). Bitcoin’s success has spawned a number of competing cryptocurrencies, known as “altcoins” such as Litecoin, Namecoin and Peercoin, as well as Ethereun, EOS, and Cardano. Today, there are literally thousands of cryptocurrencies in existence; with an aggregate market value of over $120 billion (Bitcoin currently represents more than 50% of the total value).
References
https://www.forbes.com/sites/alejandrochafuen/2018/08/22/moralists-and-money-from-gold-to-bitcoin/#d12983da16afc
Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd Ed). Retrieved from https://content.ashford.edu/ Chapters 11-13