Money and Its Functions in Modern Economy

Topics: Money, Currency, Inflation Pages: 23 (8928 words) Published: May 12, 2011
The Finance University under the Government of the Russian Federation

International Finance Faculty

Term Paper
Money and its functions in modern economy

Klyagin M.I.
Group IFF 2-2

Tutor: Olga V. Kadysheva/ Svetlana E. Tsvirko

Moscow 2010

Table of contents


CHAPTER 1. Nature of money in today’s economy5
1.1. The concept and types of money5
1.2. Functions of money7
CHAPTER 2. The role of money in the modern market economy.17
2.1 The role of money in the production process.17
2.2. Differences in characteristics of the role of money.22 Conclusion.25
The list of references.26


Money is one of the greatest inventions of a human thought. Perhaps, the whole structure of today’s economy is predetermined by the existence of money. But when did money occur and what was the reason for its occurrence? Money is a public institution, which increases wealth buy reducing the cost of exchange and contributing to greater specialization in occupation o, according to ones comparative advantage. Money appeared due to trade, and since it is established that trade is one of the most ancient occupations of mankind, therefore the emergence of the monetary system can be dated back to the times of antiquity. The origin of money is associated with 7-8 thousand years BC, when primitive tribes understood that they had surplus of some goods, which could be exchanged for other needed products. Historically, as a means of exchange, human used animals, furs, stones, shells etc. So money is determined by society itself, whatever the society recognize as a mean of exchange – is money. Money is an integral element of commodity production, which means its simultaneous development, so it can be considered that money take certain shapes at each stage of economy, which best correspond to the nature and needs of its current level. Understanding of such term as money, their role in the economy and the logic of its development comes from the knowledge of the laws of economics. Similar to any social phenomenon, money show itself in the action – through its functions. In the course of evolution, some functions of money gradually change and transform into new, more mature and sophisticated forms. After many centuries the four following forms of many have been determined: a measure of value, a means of preserving of value, a means of exchange and a means of payment. Moreover money as a measure of value and as a mean of preserving of value got formed as basic functions and from these ones later it started to function as a mean of exchange and payment. All the varieties of money function as a measure of value, as all of them serve as means of expressing of value of goods and resources, existing in global economy. Therefore, being a measure of value at a first place can be considered a prime function and a common feature of all types of money from the times of its occurrence. Basically, with the introduction of a new product this function of money is involved, expressing the value of the goods in terms of money, and then the shell of the goods is discarded and money act in a symbolic way - as a mean of a public expression of a value of that goods, which is represented in some quantity of money. The aim of the current course work is to study the money and its roles and functions in the modern economy.

CHAPTER 1. Nature of money in today’s economy

1.1. The concept and types of money
Money – is a multifunctional product, a universal equivalent which expresses the value of other goods. At the same time it is a counting unit, a unit of exchange and the most convenient unit of value calculation and accumulation. Money is an important component of modern society which has emerged as a product of economic relations and trade activities. The appearance of money was preceded by barter, but due to rapid evolution it eventually lost its effectiveness and relevance. Modern money is a result of long...
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