- Early Forms: Animal money (cow, sheep) and commodity money (grains, shells, salt) were used first but had problems of indivisibility and storage.
- Metallic & Paper Money: Metallic money and coins developed for durability and uniformity; later replaced by paper money issued by the government/central bank.
- Bank, Plastic & Electronic Money: Bank (credit) money uses deposits and cheques; plastic money (debit/credit cards) and e-money enable cashless transactions.
- Legal Status: Legal tender money must be accepted by law (coins, notes), while non-legal tender money (cheques, bills) can be refused.
Definitions [2]
Definitions: Money
- Prof. Crowther: "Money is anything that is generally acceptable as a means of exchange and at the same time acts as a measure and store of value."
- Prof. Walker: "Money is what money does" (Shows money is defined by its functions).
- Robertson: "anything which is widely accepted in payments for goods or in discharge of other kinds of business obligations.”
- “Anything which is commonly used and generally accepted as a medium of exchange or as a standard of value.” — Dr. Kent
- G.D.H. Cole: "Money is anything which is habitually and widely used as a means of payment and is generally accepted in the settlement of debts.”
Definition: Barter System
“The direct exchange of economic goods, one for another.” — Chandler
Key Points
Key Points: Concept of Money
- Money eliminates barter system problems by providing a common medium of exchange.
- Three main functions: medium of exchange, measure of value, store of value.
- Must be generally acceptable to function as money.
- Modern economy completely depends on money for smooth transactions.
- Digital payments are the newest evolution in money's history.
Key Points: Barter System
The barter system’s limitations—double coincidence of wants, no standard value, storage issues, indivisibility, and deferred payments—led to the invention of money, which streamlined trade and economic growth.
Key Points: Types of Money
Key Points: Functions of Money
- Money removes barter difficulties and supports smooth exchange.
- Primary functions: medium of exchange and measure of value/unit of account.
- Secondary functions: standard of deferred payments, store of value and transfer of value.
- Contingent functions: maximise utility and profit, distribute national income, support credit and provide liquidity.
- Overall, money is “a medium, a measure, a standard, a store” with transferability added by some authors.
