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Explain the essential characteristics required by money to function it properly.

Wednesday, July 25, 2012

Money is anything which we can use as a medium of exchange between people for sharing goods and services.
To function properly money has some functions like:- medium of exchange, measure of value, store of value, transfer of value of goods and services.
Some of the essential characteristics of money are:- it is portable, it is transferable, generally recognizable, legal tender, durable, intrinsic value, its limited supply and its general acceptance.
The major function of money is its medium of exchange. Money must be generally acceptable and generally recognized by everyone to act as a medium of exchange of goods and services. The intrinsic (internal) value of money must also be good. As money is used to buy goods, the internal value of money should be able to buy the products in the country.
Another function of money is the measure of value of goods and services. Limited supply of money increases the value of money. The money must have its internal value so that it can buy the goods in the country.
Money also has been popular because a value can be stored there. Money is portable and can be carried to any place. Money is also durable due to which it can be kept for a long time.
Due to these characteristics of money, investment increases and therefore a country and whole world develops which brings happiness among people.
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