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What is money and why do we need it? Historic evolvement of money: economic perspective. - Essay Example
Pages 5 (1255 words)
Economists such as Crowther and R.P. Kent define money as “a commodity which is generally acceptable as a medium of exchange and at the same time acts as a measure and a store of value" (Economics Concepts, 2012)…
Economists such as Crowther and R.P. Kent define money as “a commodity which is generally acceptable as a medium of exchange and at the same time acts as a measure and a store of value" (Economics Concepts, 2012).In the ancient societies such a generally acceptable commodity became important with advancement of indirect transactions. Example: in a society where money is not involved a farmer produced wheat. He also needs salt. Salt producer wishes to acquire fish but not wheat. Hence the farmer would have firstly exchanged his wheat for fish and then fish for salt. Instead money could enable farmer to purchase salt directly from the producer without involving fisherman. Division of labor thus fueled emerging of money. Due to the fact that money could facilitate exchanging of any good or services people started to store money for future consumption. Thus the role of money as a store of value also became prominent. In early societies silver and/or gold coins were used as money. In time trading of goods and services became a large scale practice in the societies. And the amount of silver and gold became insufficient to exchange the amount of goods and services circulating in the economy. Currently the governments produce notes and coins and supply them to the economy for facilitating trade. However government gold reserves still serve as an indication of country’s wealth.It is also argued that evolving of money has not yet reached the highest possible stage because the current day money is not generally accepted as a medium of exchanging across country borders. ...
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