What is meant by 'money' in a modern economy Essay

What is meant by 'money' in a modern economy - Essay Example Alla Stephun, while writing on the philosophy of money says "Money is a reality, a permanent feature of our everyday lives. It gives our lives a particular rhythm, a particular charm, a particular perception of the world and our place in it." This buttresses the point that money has really affected and effected humanity. There are situations where we think of what money is in modern society. In attempt to answer some of these pertinent questions, a number of topics will have to be discussed. These essay therefore examines the issue that has to do with money in the modern economy, explaining what credit creation is. Particular attention will be devoted to the role of the Bank of England as a full controller of the quantity of money in circulation in the UK economy. Money can be defined in a number of different ways - from the simple manner to the complex .The way it is defined ,depends to an extent on the situation and circumstances surrounding the situation. But whatever way money is to be defined, it all points to one direction - it is a medium of exchange. Money does not necessary need to be in cash - which is money is form of bills(notes) or coins, it can also be form of assets - items that have economic value. So to this effect, we can also refer to money as being any items that carries out the function of money. CHARATERISTICS OF MONEY: Money, just as any other entity has certain characteristics that are associated with it. Some of the very obvious characteristics of money will be briefly talked about here. These are: 1. Durability: This refers to money being able to maintain its shape or form over a period of time. For money to be able to perform certain of its functions- like being a medium of exchange or a store of value, it has to posses the characteristics of durability. 2. Portability: This has to do with the easy movement between different locations that money has to undergo when there is the need, particular for exchange purposes. 3. Divisibility: Money has to be capable of being easily divided into smaller fractions, when exchange for good s or services of varying values are to be made. For any medium of exchange to be efficient, it has to have that capacity of serving in that capacity at varying values. FUNCTION OF MONEY: The single reason that money serves as a medium of exchange, makes us all to know that it has some usefulness. Money is desirable, though there are some individuals that are of the view that the possession of too much of money by a single entity is bad. Some of the characteristics of money are: 1. Medium of Exchange: Money serves as a medium of exchange, good and services are exchanged for money. An older manner where trading was done was by barter. Money has made transactions in modern times to be easier. 2. Unit of Account: This means that money serves as the benchmark for determining the worth of good s and services in a modern economy. It functions as the measuring unit of value or prices. 3. Store of Value: