Money

Only available on StudyMode
  • Download(s) : 861
  • Published : January 6, 2013
Open Document
Text Preview
3. MONEY
Money is everything that serves as universally excepted medium of exchange or means of payment. Functions of money:
Medium of exchange – enables people to exchange goods and services for other commodities Store of value – at home money loses value because of inflation so it is better to deposit financial assets with a bank. Money can also be stored in other forms – securities (cenné papiry), shares, or bonds (dluhopisy, obligace). We can also invest in properties, lands, arts, jewelry, antiques or precious metals and stones. Measure of value – it enables us to compare the value of various goods and services- 11 computers =1 car Evolution of money

* A – Before money existed people had to use the barter system to exchange their products and services. Barter meant the direct exchange of goods. * B – Later people used commodity money – goods, which members of the society recognized as having value – cattle, sculls, shells, feathers, salt, wine,… * C – Precious metals, especially gold and silver (had the basic qualities as divisibility, portability, durability, and homogeneity * D – Paper money – developed from paper receipts, that goldsmiths gave their clients as confirmation of accepting their gold for safekeeping in vaults (podzemní sejf). * E – Fiat money – nowadays notes and coins are given denominations by the government irrespective of their metal content or precious metal backing, this money is officially declared by law. Money is not backed by precious metals anymore; it cannot be exchanged for gold. Bank notes and coins made of various metals became legal tender. Money supply (money stock)

Economists in all countries closely watch the amount of money in circulation, the money supply or money stock. All movements of the money supply are important indicators of inflation, economic activity, and growth. The government intentionally regulates the money supply to influence the above mentioned phenomena for the sake of economic...
tracking img