Question

b. Please explain the functional definition of money and provide an example for each part. Now, Explain the Fed’s definition of money. How and why does the revolution in the financial market effect the current definitions?

Answer 1

Money is often defined in terms of the three functions or services that it provides. Money serves as a medium of exchange, as a store of value, and as a unit of account. Medium of exchange. Money's most important function is as a medium of exchange to facilitate transactions.

The following points highlight the top six functions of money.

• A Medium of Exchange
• A Measure of Value
• A Store of Value (Purchasing Power)
• The Basis of Credit
• A Unit of Account
• A Standard of Postponed Payment

Full form of money : ➡ M - Momentarily. O - Owned. N - Not. E - Eternally.

• Money's most important function is as a medium of exchange to facilitate transactions.
• Money as a measure of value, helps in determining the value of goods and services in the economy.tTherefore, with the help of this function everything can be measure in a common denominator or unit.
• Money is one of the best stores of value because of its liquidity, that is, it can easily be exchanged for other goods and services.
• The Basis of Credit: Money facilitates loans. Borrowers can use money to obtain goods and services when they are needed most.
• The unit of account is something that can be used to value goods and services, record debts, and make calculations. Money is considered a unit of account and is divisible, fungible, and countable.
• The standard of deferred payment is a function of money. It is the function of being a widely accepted way to value a debt, thereby allowing goods and services to be acquired now and paid for in the future
• Fed's definition of money
• The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation. ... The monetary base: the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).
• The Market Revolution, which occurred in 19th century United States, is a historical model which argues that there was a drastic change of the economy that disoriented and coordinated all aspects of the market economy in line with both nations and the world.
• The market revolution sparked not only explosive economic growth and new personal wealth but also devastating depressions—“panics”—and a growing lower class of property-less workers. Many Americans labored for low wages and became trapped in endless cycles of poverty.
• Financial markets refer broadly to any marketplace where the trading of securities occurs, including the stock market, bond market, forex market, and derivatives market, among others. Financial markets are vital to the smooth operation of capitalist economies.
• Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money.Fiat money, like any check or note of debt, is without use value as a physical commodity.

Financial markets play a critical role in the accumulation of capital and the production of goods and services. The price of credit and returns on investment provide signals to producers and consumers—financial market participants.These markets use the Euro to facilitate saving, investment, borrowing, and lending.

Economists define money, where it comes from, and what it's worth.The implosion of the U.S. economy would plunge the world into a financial dark age, so many other countries, time-related deposits, savings accounts deposits, and non-institutional money market funds. These are the after effects of the Revolution.

financial revolution in the next 10 to 15 years.Several leading experts point out that the current monetary system is Based on estimations, the global “mobile pay” market will surpass $500 billion in 20. These types of currencies have a significant positive influence in the economy

Money as we know it has only existed for a relatively few years – the first banknote was printed in France in the 17th Century. More, recently, however, currencies have started to disappear; more than 600 in the last 30 years, and the trend continues.

Several leading experts point out that the current monetary system is bound to undergo significant changes in the years to come because it is compromised by issues such as inflation, the illicit economy and counterfeiting.

The monetary system is at the core of the economic system that we know today. Almost all transactions are based on an exchange of money. It is actually in many cases illegal for two parties to trade services (for example, moonlighting). Money is only valuable as long as the value is guaranteed, and as long as we believe that it is valuable and accept it as a payment method and a reward for goods and services. However, nowadays, the trust in money and its value is under pressure.

In the last 10 years, we have seen how relatively easy it is to defraud, cheat, and lose money in the current financial system. The banks print money out of thin air and profit from doing so. Today, we are closer than ever to a financial revolution in which money will disappear and be replaced by something else. Physical banknotes will be substituted by local social currencies, points that you earn by doing social work, services, or companies’ own currencies based on customer loyalty, among others.The use of credit cards has dramatically increased in recent years