Types of money

Dacey Rankins
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2023-11-25 17:26:38
Money is one of mankind's greatest inventions.
Money is a special commodity which is exchanged for all other commodities, and by means of which the value of all other commodities can be estimated.
There are a large number of classifications of money.
There are three types of money:
  1. commodity money (gold, silver, pearls, stone money, cattle, etc.);
  2. signs of value (coins and paper money);
  3. Credit money (credit cards, checks).
Historically, commodity money was the first to appear. The main difference between commodity money and signs of value and credit money is that commodity money has its own valuewhile coins and paper money do not.
Depending on the form of money, the following can be distinguished:
  • cash;
  • Cashless money.
In the economy, money performs a number of functions, that is, it is used as:
  1. means of exchange (money allows you to exchange them for any commodity and for any other money);
  2. means of payment (taxes, pensions, allowances, loan payments are paid with the help of money, the difference is that the payer does not receive any goods in return for such payment);
  3. means of measuring value (money allows you to estimate the value of goods);
  4. means of accumulating savings (money can be used to accumulate wealth, preserve it, and pass it on by inheritance).
Advantages and disadvantages of different types of money
Each type of money has its advantages and disadvantages.
 
Advantages
Disadvantages
Commodity Money
The time for the purchase of another product is reduced (instead of the chain "goods – money – goods" the chain "goods – goods").
They have their own cost.
They practically do not depreciate over time.
Hard to fake
The goods obtained as a result of exchange may not be equal in value.
Hard to carry
Value Signs
Easy to handle.
They are easy to carry.
Have low manufacturing costs
They have no intrinsic value.
Depreciate during inflation.
It's easy to lose.
Can be faked.
Wear out over time
Credit money
The type of operation (transaction) is not fixed.
Can be used worldwide.
The amount of the loan is chosen by the payer.
Obligation to repay loan payments
Credit cards are not accepted everywhere.
A fixed amount or interest is paid for the use of the card
 
Properties of Money
Money can perform the above functions due to its properties:
  1. liquidity is the ability to be converted into a means of payment.
  2. exchanges. The money should be divided into several parts, it should provide an opportunity to pay any amount, to get change.
  3. Security. Money must be protected from counterfeiting.
  4. Duration of use. The material from which the money is made must ensure its long service life.
  5. Stability of their value. Money, performing the function of saving, must ensure the constancy and stability of value.
  6. Homogeneity. There must be money of the same quality in circulation.
  7. Portability. Money should be such that it can be easily carried and paid with.
  
Liquidity is one of the main properties of money.
Family assets are all the property in which the family can accumulate, preserve and inherit its wealth.
One type of asset is money. Money can perform the function of accumulating savings.
Money, like any other asset, is characterized by liquidity, that is, the ability to be converted into cash – into a means of payment.
Note!
Cash is the most liquid asset.
A bank deposit is also liquid, since the bank is obliged to return the invested funds on demand.
 
Note!
The most illiquid property is that of the family that is very difficult to sell due to its condition (e.g., depreciation).
Example:
Since it takes time to recover funds, liquidity, i.e. the speed of conversion into cash, decreases.
 
The volume of money supply is defined as the product of the number of banknotes and coins and their face value.
The issue (printing) of money is called emission.
The need to issue money arises in two cases:
  1. to replace worn-out banknotes (natural, i.e. natural, emission);
  2. to change the amount of money supply in the economy.
When worn-out banknotes are replaced, the amount of money supply does not change.
An increase in the money supply can lead to inflation.
Counterfeiting of banknotes
Counterfeiting is an international crime.
 
The fight against counterfeiting is taking place all over the world and is regulated by the Geneva Convention for the Suppression of Counterfeiting of Currency.
Signatories to the Geneva Convention for the Suppression of Illicit Counterfeiting of Currency have committed themselves to punish the following acts:
  1. all fraudulent actions related to the production or alteration of banknotes;
  2. sale of counterfeit banknotes;
  3. attempt to sell counterfeit banknotes;
  4. attempted production and sale of counterfeit banknotes;
  5. acquisition or manufacture of instruments for the manufacture or alteration of banknotes.

Liability for counterfeiting banknotes can occur after the first banknote is made, regardless of whether the counterfeiter managed to sell the banknote or not.

One of the disadvantages of paper money is the possibility of counterfeiting it, so it is important to know the signs of authenticity of banknotes.
A counterfeit bill is missing three or more signs of authenticity at the same time!
Signs of authenticity of banknotes
Signs of authenticity of banknotes can be divided into the following groups:
  1. controlled by light;
  2. controlled by magnification;
  3. controlled by changing the angle of view (when the banknote is tilted);
  4. controlled by touch.
What to do if you get a counterfeit bill
If you have checked the banknote for signs of authenticity and found that the banknote is counterfeit, you must immediately hand it over to the bank!
 
The bank will execute the seizure of the banknote, and the damage to the person handing over the counterfeit banknote will not be reimbursed!
Therefore, before you take, for example, change at the market, check if you have received counterfeit bills!
Cryptocurrencies

Cryptocurrency is a special type of means of payment.
Cryptocurrency exists exclusively in digital form, but is fundamentally different from electronic money.

 

Only the Central Bank has the right to issue real money, and anyone can issue crypto money.

Payments with the help of digital money are carried out in exactly the same way as ordinary electronic transfers through the non-cash payment system.

 
 
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