Question

Explain the concept of money. What characteristics and what functions does something have to have/perform to be considered money by economists. What is the fundamental difference between commodity money and fiat money? How has the social creation of money affected the ability of humans to achieve Economic Growth?

Answer 1

Answer 1 ) Money is what money does.Money is anything which people use to buy different goods and services.

Answer 2 ) Following are the characterstics/functions of money which are considered by economist :

PRIMARY FUNCTIONS : a)Money is a medium of exchange b)It is a unit of account c) Measure of value.

SECONDARY FUNCTIONS : a) It is a standard of deffered payments b)It is having store of value

Answer 3)Commodity money is the money whose value is derived from that commodity itself. It was used in a non- monetised economy. Example :Stones,gold,tea leaves etc.

Fiat Money is a legal tender money which is not supported by gold.The central bank may issue as much fiat money with the help of their authority.

Answer 4 )Money is the most liquid asset which are soceity is using to purchase different goods and services.It enable soceity to buy ,sell,invest,save etc .Because of these merits soceity can acheive economic growth by producing different goods and services.