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The Best Definition Of Money

Money is known and recognised by everyone and it is also known that money conditions many of our actions, but we encounter great difficulty in attempting to state precisely what money is. The random use of such terms as currency, cash and credit also adds to the confusion. Money is certainly a Complex Concept.

The word “Money” like so many other terms in economics has been defined differently by different authors. A definition which seeks to differentiate a complex concept such as money from all other concepts cannot be framed on the basis of the material of which money is made.

SEE ALSO: Equality Of Demand And Supply Of Money/ Determination Of Interest Rate

What is Money : The Definition - ShineMat

Generally, money is defined in terms of its functions. Some have tried to define money in purely legal terms. But many economists have based their definitions on the “General Acceptability” aspect of money.

With money defined in this way, the coins and paper money (together comprising best known as money) qualify as money without question since they are all commonly accepted as means payment. They are also endowed with legal tender powers to discharge debts. Demand deposits of banks do not have legal tender powers but they represent the obligation of the banks to pay out currency if and when the depositors call for. These can, therefore, be spent directly and are generally acceptable as payment. Thus, in modern economic system, money includes at least the currency and the demand deposits of commercial banks.

Reference Book: Money Banking and International Trade.

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Topic Under: 3/12/2017
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