Question

Write Short Note on Qualities of good money.

Answer 1

The following are the qualities of good money:

1. General acceptability: Good money is the one which is readily accepted by all without any reluctance.  This quality is possessed by gold and silver.
2. Divisibility: Any commodity acts as good money if it can be divided into small units. For example, currency notes, gold, silver and coins possess the quality of divisibility, as they can be divided into different denominations.
3. Durability: It should possess the quality of durability. That is, it should be long-lasting. As currency coins are made up of metal, these are more durable compared to currency notes.  
4. Cognisability: By cognisability, we mean that good money is the one which is easily recognisable by all the members of the society and so special efforts are not required to recognise it. 
5. Portability: It should be easy to carry from one place to another without any difficulty, expenses or inconvenience. 
6. Homogeneity: Money of the same denomination should be homogenous in size and quality. For example, all Rs. 5 coins should be of the same size, colour, etc.
7. Stability of value: Anything which is used as money should be stable in the sense that its value should not change frequently.