What is money?

They said:

"If women didn't exist, all the money in the world would have no meaning"- Aristotle Onassis

"Money can't buy love, but it improves your bargaining position."Christopher Marlowe

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We all use the term 'money' quite commonly. Everyone wants it and uses it. But do we really know what it is?

Before introduction of money, there was another system for buying and selling a particular commodity. 

Let us assume that Meena possesses surplus rice. She also needs some wheat. On the other hand, Leena has surplus wheat and needs rice. So, what should they do? They will come together. Meena will take required quantity of wheat from Leena & give that much rice to her. In the same manner, Leena will also get what she wants. 

Similar system was there for exchange of services too. This system of exchanging the goods (वस्तू) and services was called 'Barter System'. 

Can you imagine what type of problems would exist in such a system? 

• Is it easy to find a person who needs the goods which you have, and at the same time has the surplus of what you need? 
• What if the item is perishable (नाशवंत) like vegetables and changes its form, before it reaches the buyer's hands?
• Is it easy and realistic to exchange something immovable like a house for movable item like grains?
• If one wants to exchange a goat for rice, how will he/she divide goat into equivalent value of rice? 

In order to overcome these problems, the concept of money was introduced. You can now think of the characteristics of money! They are: Durability, Portability, Divisibility (विभागणी) and uniformity (सर्वांसाठी एकच मूल्य) 

Do you see these qualities in the paper notes that we use today? Based on the characteristics of money, one can understand the following Functions of money:

• Money is a store of value (किंमत साठवणे)- Ramesh gets pocket money of Rs. 500 p.m. (per month) and wants to save it for his picnic. He can do so because value of money can be stored.
• Money is unit of account - It is possible to measure the value of a good in terms of money e.g. a T-shirt costs Rs. 1000. This is possible because of money.
• Money is a medium of exchange - Money is widely accepted as medium of exchange. Because of its characteristics (mentioned above), nobody refuses to accept money, in exchange for goods or services. 
• Money is a standard of deferred payment - If Suresh buys a machine from a company for Rs. 10,000, and the company allows him to pay the amount after (say) 1 month. This period of 1 month is called 'Credit' period. Such a delayed payment is called 'deferred payment'. Now a days, global economy runs mostly on credit system only. This is possible because of money.

In short: 

• Money is an intangible concept. It means money cant be touched, smelled, etc. But it can be seen in terms of the numbers & its form.
• It has certain characteristics & functions