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|Money is a specific article, which appears to be the equivalent cost of other articles. Different things, liabilities and the article liabilities system can act as money.
Types of money:
Based on the natural material, money is divided into two basic types: Natural and Symbolic.
Natural money. (Substantial, commodity, authentic and natural)
Money, in a role appearing as commodities, possesses self value and utility. They can be used not only as a means of money (for example, a gold coin can be melted into a jewelry item). Particularly all types of articles are of such money, which acts as an equivalent in the primary stages of development of goods circulation (cattle, grains, fur skin, shells and so on.) and also metallic money, made with copper, with bronze, with silver and golden full-weight coins.
Different articles even today carry a money role in specific conditions. For example, the cigarettes by imprisoned people and the prisoners of the war, vodka and sugar during the periods of economical crisis, arms and ammunition in the places of military conflicts.
But slowly natural money is going away from circulation. They are not comfortable for frequent rotations, get wiped off and spoil during storage. But the most important thing is their manufacturing process is much costlier. The requirement of money increases with the rise in the economy. For the government to handle the money system it becomes too expensive. The cost of money in such an economy always balances with the GDP scale, which diverts too many resources. The economy stands as noncompetitive. Even in the international currency market from the year 1973 the usage of the gold equivalent was stopped.
At present, natural money is sometimes used as a means of savings. Most often they represent only a collector value.
Symbolic (paper, fiat, unreal) money
Money which does not have an individual value or it is disproportionate with the face value. Generally these are credit money. The following relates to such money:
Coins made of cheap alloys, for example, on aluminum bases (billion coins)
Electronic money, including in terms of records in the bank accounts;
Other valuable papers.
Today the basic form of money is electronic (cashless) money and banknotes. With the distribution of plastic cards, banknotes are slowly being expulsed from conversion.
Basic functions of money:
Money develops one self through its functions. Usually, money emphasizes functions such as:
• Value measurement. Different articles are compared and exchanged among themselves on the basis of the exchange equivalent calculation of these goods for money. For the articles the rates will be appeared. Money is also used during the registration of the value terms of some economical parameter or liability records.
• Means of circulation. Money is used as a means of intermediation for the rotation of articles. Under the means of circulation is understood as special type of article, which is submitted to the seller by the customer, on obtaining the article or its services. For describing the light degree, with which any type of resources may be changed into a circulation means which is accepted in the economy, used in the concept of liquidity.
• Means of hoarding. The function of the means of hoarding is fulfilled by the money, directly not participating in the rotation. Money as a means of hoarding permits us to carry over the purchasing power from the present to the future. However, the purchasing power depends on inflation.
These three alternative functions as per their point divides the monetary stock into integrated parts: money acts either as a means of hoarding (saving), or as a means of circulation.
Other functions of money
• Means of payment. The yielded (the saved, the accrued) debts and other liabilities are comfortable to consider and demand clearance in the form of money. The given function of money is also taken during money matters with the financial agencies.
• The function of world money. It takes over during bilateral relations between countries or judicial or physical bodies, situated in different countries.
The value of money, as a means of circulation, consists of their buying power. The buying power must not be dependent on the internal value. It can be defined by the trust of the money holders.
The value of money, as a means of saving, is defined as a rate of interest that is the price for the usage of the borrowed (taken in credit) money.