Question

In everyday language we say, “let me borrow money”, “she makes a lot of money”, “she has a lot of money”.

How would you translate these statements into how economists use the terms money, income and wealth?

Answer 1

We know that people cannot live without money. Every person is working for making money. Money is the medium of every transaction that happens in the life of a person. In economics, money means a numerical unit which is used for making transactions that means buying and selling of goods and services in the market. Money stands as the medium of exchange.It is a liquid asset. Money helps to avoid the problem of double coincidence of wants. Each country has its own monetary system. Money is made in coins and currency. It has a value in the market. The main features of money is that it can be trasformed because it is a physical product. It can be recognised. The value of money changes while moving from one country to another country.

Like money, another most important term used in economics is income. We can say that income is money. Because income means the rate of money which a person or business have in their hands. They receive income by purchasing or giving goods and services. People get income mainly through their salary or wages. There are many other sources of income. They are rent, capital, rate of interest etc. Income is mainly used for meeting our day today needs. We can say that income is a type of earning made by people and business. We can also make income  through investing money in shares, bonds, real estate etc.. Another side of income is that, if we receive income we want to pay a particular percentage of money as tax to the government. People mainly use income for housing, food, medical, entertainment etc. There are different types of incomes like taxable income, non taxable income, disposable income, discretionary income etc..

Like the terms money and income, the term wealth is also very important in economics. Wealth means the rate of asset which is owned by us. It can be a person, business firm and goverment. Wealth is a physical asset. Wealth is the accumulation of resources. A person will become wealthy when he become able to buy resources. Wealth is a sign of income in the hands of people. Wealth can be measured in many way. Amount of money which is owned by a person can be termed as wealth. Like that land, buildings etc. owned by a person is stands as his wealth. Wealth can be measured in terms of money and it will solve the problem of evaluating wealth in the form of different types of goods. Wealth is the rate of money which is owned by people and business at a particular period of time. We can say that wealth will help us to satisfy our needs.