Money

A simple definition of money is that it is anything that is regularly used to buy goods and services.

Money is generally cash in the form of coins and notes but the definition also includes bank deposits, cheques, debit cards and credit cards.

Near money

This is a term that is used to denote non-cash assets that can be quickly and easily turned into cash. Such assets include foreign currencies, savings accounts, bonds and certificates of deposits.

Functions of money

A medium of exchange:

Money is the ‘medium’, or form, that buyers use for purchases; sellers are willing to accept this medium in exchange for these purchases.

A unit of account:

Money is a unit of account, as it measures the market value of different goods and services. It is for more efficient for trading purposes to express the price of goods and services in dollars

A standard for deferred payment:

People often want to agree today the price of some future payment. For example, workers and managers will want to agree the wage rate for the coming year.

A store of value:

Money is a store of value as it can be stored and used at a later date in the future. This means that money must be able to hold its purchasing power over time.