[quote author=Vinner]Money can simply be defined as any object that is generally acceptable as a means of exchange for goods and services. Money also involves anything that can be used to repay debt.
Functions of money
Generally, there are four major functions of money:
1. Medium of exchange:
Money performs the function of acting as a middle man for the exchange of goods and services. This means that money can be used to buy goods and services.
2. Measure of value:
Money acts as a tool in measuring the value of a commodity or service. It performs the function of quoting and bargaining prices.
3. Standard of differed payment
Money performs the function of payment of debts. Since money is a legal tender, it can be used to settle debt that is been owed.
4. Store of value
Money can be saved, stored and retrieve anytime it is needed. The value of money always remain stable overtime
Qualities of Money
1. Acceptability: money must be generally acceptable
2. Portability: money can easily be moved from one place to another
3. Durability: money can be able to stand the test of time
4. Divisibility: money can easily be divided into different parts
5. Cognizability: the value of money must easily be identify
6. Homogeneity: each unit of money must be the same
7. Fungibility: each units of money can easily be substituted mutually
Types of money
Generally, there are three types of money:
1. Commodity money
Commodity money is the money in form of commodity or precious metals like gold. It has intrinsic value, that is, it is valued aside from being used as money. Commodity money was mainly used as a medium of exchange thousand years ago.
2. Representative money
Representative money involves something that is used to represent money which is not money itself. Representative money is anything that can be used to exchange commodities. It consists of either paper money, coins or any physical object that can be used as a medium of exchange for commodities.
3. Fiat money
Fiat money is also known as fiat currency. It is money valued by government order only. The fiat currency is usually issued as a legal tender from the central bank. It is usually in paper notes and coins. The fiat money is generally acceptable as a medium of exchange and also as a means of repaying debt.[Money I'd ameand of paymen]
