Реферат: What Is Money Essay Research Paper What

What Is Money? Essay, Research Paper

What is ?money?? How is the supply of money affected by the aims and the

actions of the commercial banks, the central bank, and the government?s

financing of the PSBR?The Concise

Oxford Dictionary defines money as ?a current medium of exchange?. This definition,

if rather sparse, does detail the essential nature of money: it is a recognised

form of exchange for goods and services. It can take many forms: anything which

is accepted by the seller, because it has a recognised value which can be used

to purchase further goods and services, will suffice as money. Why money

exists, even in centrally planned economies, is because it is efficient. A

barter economy, in which no money was used, requires those wishing to make a

transaction to exchange goods and services. The complexities involved in such a

system are immense. For example, an apple seller, wishing to obtain a hammer,

would not only have to find a toolmaker wishing to obtain apples, but would

also need to make an agreement regarding the appropriate apples/hammer exchange

rate. The former problem is known by economists as a ?double coincidence of

wants?, whilst the latter demonstrates the hassle of having to know relative

prices, not only for apples and hammers, but also for every other good or

service in the market. If, however, one good becomes the numeraire good, and

the value of every other good or service was measured in relation to it,

transactions will be made much more easily. This numeraire good would become

the money of the economy. To be effective,

money will have to fulfil some or, preferably, all of the following. It must be

accepted as a unit of account and a means of exchange or payment, be durable,

scarce, easily dividable, and stable in value. In modern

societies, coins and notes (token money) are obvious forms of money, but money,

and the money supply, takes on more forms than just these. Hard currency,

such as notes and coins, are considered the most liquid monetary asset there

is, as it can quickly be turned into money. Its liquidity is very convenient,

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