Properties of money, their functions and types. money supply

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44

Money supply in circulation is presented in two forms. Coins and banknotes are called valid. For such money, the nominal value (indicated on them) corresponds to the real one. Let us consider further the functions and properties of money.

Coins

The form of this kind of money was different. At first it was piece, then - weight. Coins of later periods had distinctive features established by law. The most convenient form of metal money is round. Initially, silver and gold coins were used. The latter were switched to in the 2nd half of the 19th century. The production of money from gold was due to the characteristics of this metal. They allowed the coins to fulfill their purpose. The main properties of money from metals are that they have their own value and are not subject to depreciation. Gold coins are considered to be a fairly flexible financial instrument. They can adapt to existing conditions without prejudice to their owners. When there is a lot of gold money in the country, that is, their number exceeds the real need for them, they are sent to the reserve. In case of increased need for them, the coins are returned and start again.be used. Under such conditions, no special measures are required to regulate the amount of money, as is the case with banknotes, for example. However, there are also disadvantages. They are made up of the following factors:

1. Gold production has not kept pace with the release of goods. In this regard, the full need for money was not provided.
2. Highly portable coins could not be used in small circulation.
3. Gold money is much more expensive than paper money.

Banknotes

Russian paper money appeared to replace gold coins. The difference between the nominal price and the value of the issue form the issuance profit of the treasury. It acts as a significant element of state income. Banknotes were issued simultaneously with gold coins, gradually pushing the latter out of circulation. With the emergence and development of the budget, the emission expanded. Its value was determined by the state's need for money. The issue of banknotes is not regulated by the needs of trade. There is no automatic mechanism for withdrawing them into reserves. In this regard, the stability of money cannot be ensured.

Depreciation

When there is a lot of money made of paper in a country, they can stay "on hand" regardless of the turnover. As a result, they overflow the circulation channels and begin to depreciate. This happens for the following reasons:

1. Excess government output.
2. Reduced confidence in the issuer.
3. Unfavorable ratio between exports and imports.

The basic property of banknotes is that they are signs of value and are issued by the state to close the budget deficit. As a rule, they are not exchanged for gold and are endowed with a forced exchange rate.

Credit marks

They appeared with the beginning of the development of commodity production, in conditions where the sale was carried out in installments (on credit). Their emergence was determined by the realization of the function and properties of money as a means of payment. They act as a liability that must be repaid within a certain period of time. The economic purpose of banknotes is:

1. Reflecting the need for cash turnover.
2. Save real tokens of value.
3. Fostering the development of cashless movement of funds.

The banknote is Russia's credit money. They are issued by the Central Bank to carry out the corresponding operations of loans and loans within the framework of various business processes. By providing a loan, a banking organization can allocate its own funds to the borrower. At the end of the period of use of the loan, they are subject to return to pay off the debt.

Distinguishing Features

Paper money and classical banknotes are different:

1. By the emission method. The issue of paper money is carried out by the Ministry of Finance, and banknotes - by the Central Bank.
2. The purpose of putting into circulation. Paper money is intended to finance the budget deficit, banknotes - business transactions.
3. The specifics of the issue. Banknotes are put into circulation in connection with credit procedures that are carried out in conjunction with the actual production and sales processes, paper signs are sent into circulation without this link.

In the event of a breakdown in communication, credit funds lose their advantages and acquire the general properties of money. They turn into paper signs of value in such cases.

Properties of money

Tokens of value act as a universal equivalent. They have a complex of three characteristics:

1. Direct exchangeability. This means that any item can be exchanged directly for finance.
2. An independent form of exchange value. The price of various products acquires a uniform expression in the cost of one product.
3. External material form of labor. All or part of the effort has a financial dimension.

Direct Exchangeability

It is believed that this is the main property of money. It manifests itself in the process of commodity exchange or their implementation. Part of the population's finances turns into various products, as a rule, essential goods for individual use. At the same time, funds that are intended to compensate for the costs of production and its expansion cannot be directed to the purchase of items that satisfy personal needs. Nevertheless, in both cases, the main property of money is manifested - a direct exchange for services and goods.

Exchange value

The manifestation of this property of money is thatthat in the process of production the labor contained in the product is equated by comparing its price with signs of value. Goods are expressed through exchange indicators (prices). At the same time, money is the universal equivalent. They have a certain independence of movement. Funds can be accumulated in savings, participate in the maintenance of economic relations between certain specific persons. At the same time, the properties of money do not allow them to turn into absolute we alth. This is due to the fact that the movement of labor costs does not in all cases act as the real price of products. For example, taking into account the cost of fixed capital, inflationary trends that affect redistribution processes should also be taken into account.

Community Labor

The external material form of labor lies in the fact that, when equated to money, products express and measure the work contained in them in terms of value. In traditional cases, this measure from the standpoint of quality is the purchasing value of the goods. From a quantitative point of view, the volume of production is considered.

Destination

The properties of money allow it to be used for:

1. Accounting for the cost of natural materialized labor.
2. Comparisons of social and individual production activities.
3. Comparison of planned and actual costs.

Summarizing these functions, we can say that money is used to ensure control over the measure of labor and consumption, to evaluate financial, industrial and economic activities onenterprise, accounting, statistics, analysis. A specific feature of the execution of these tasks is the ideal use of funds.

Pricing

It is carried out in several directions. According to the main ones, in setting the price of products, the decisive role belongs to indicators of costs and utility. Within the framework of this trend, the formation of value is carried out as a result of equating it with money. The second direction was considered by Marx. He attached great importance to the function of money as a measure of value. Marx believed that signs act as an equivalent of the price of products. The third direction involves the use of money in pricing due to its ability to be a means of payment.

Domestic concept

In Russia, the most common direction in the development of the problem of money as a cost measure is the following:

1. Forming the price of goods without the use of financial resources is not possible.
2. Price acts as a monetary expression of value - the value of products.
3. Market indicators have upper and lower deviation limits. This can be represented as equalities: lower threshold=cost + revenue, upper threshold=profit + demand.
4. The deviation allows you to redistribute the national product between different areas and strata of the population.
5. In the process of determining the price, the utility of the goods, production costs, the degree of effective demand and the cost of complementary andrelated products.

Specifics

The price scale is a special current element of the system. Within the framework of the gold coin standard, the cost of a certain weight unit of metal is formed. The prices of all products are tied to the gold content in the banknote. The cost scale is based on the subsistence level. At the same time, an inverse relationship is also established. Determine the scale of prices exclusively consumer goods. In a transitional economy, all these concepts are not interconnected and are multi-level.

Invoice

The use of money as means of account is typical for a developed market economy. Under such conditions, fixed prices act as a mentally ideal operation based on traditions. Changes in the financial system in the form of monetary reform, restructuring of the economy, denomination do not change this function. In these cases, the price scale is subject to adjustment.

Means of turnover

In terms of circulation, money is considered an intermediary of exchange in the process of simultaneous movement of services and goods. This task is necessarily performed by real signs, but not in all cases full-fledged ones. The purpose of this function is as follows:

1. Removing the qualitative and quantitative limits characteristic of bartering.
2. Ensure that financial income is realized in line with labor costs.
3. Participation in the distribution and redistribution of GDP.

In case of negative phenomenamoney that does not fulfill this function activates the naturalization of the exchange. This, in turn, leads to the emergence of a shadow economy.

Problems

When there are violations in the financial system (for example, with hyperinflation, lack of signs "on hand"), the appointment of money acting as a means of circulation is curtailed. This, in turn, provokes the development of barter, mutual settlements. There are surrogates, pseudo-money, the shadow economy is growing. This situation leads to a decrease in budget payments, non-payment of transfers, a decrease in the solvency of citizens, aggregate demand and supply.

Savings

This function concerns the circulation of gold or 100% backed banknotes. Realizing this task, financial resources act as a factor of macroeconomic balance. In modern conditions, this function is associated with the absolute liquidity of money. Unlike any other asset, the owner is in any case able to repay its obligations. In addition, financial resources can store value. This property is manifested in the ability to use the appropriate price of what is purchased today to pay for products in the future.

Preconditions for savings

The growth of citizens' savings is due to:

1. Increasing the income of the population.
2. Changing the structure of consumer demand towards durable goods.
3. The desire to create conditions for the continuation of the usual life after the lossdisability.
4. The desire to eliminate the contradictions between consumption and income of young people (in this case, savings are directed to the maintenance of children).

Types of savings

Savings may be of a credit nature. In this case, the funds are kept in banking and other financial institutions. This type of accumulation is consistent with market conditions, since credit institutions accept free funds, redistributing them in economic interests. Thesaurus (cash savings) has no social significance. The development of this form provokes paradoxes of thrift. At the same time, the state loses control over the distribution of financial flows. Money, performing the function of accumulation, affects effective demand, changes its dynamics, influences its distribution depending on population groups and its volume.

Means of payment

When money performs the function of a medium of exchange, their movement occurs simultaneously with the movement of products. If the task of the payment instrument is implemented, a time gap is formed. The discrepancy between the movement of money and goods is considered a feature of this function. Its implementation is associated with various obligations and the need to pay them off. Money as a means of payment is used for:

1. Wages, pensions.
2. Repayment of loans and interest.
3. Implementation of tax, transfer payments.
4. Making premiums.
5. Implementation of judicial and administrative decisions.

Among the features of this function isnote:

1. Independence of the movement of funds, not related to the movement of products.
2. Participation of various monetary forms - cash/non-cash - as real finance.
3. Possibility of participation of defective funds.
4. Failure to complete the task may provoke the likelihood of an increase in the non-payment crisis.

World Finance

Money is involved in international circulation. Their use by different states and foreign nationals (non-residents and residents) makes them a global means. The finances that serve international economic relations are called currency. Money acts as a universal equivalent with absolute liquidity. World funds are used to cover the deficit in the balance of payments in the framework of international exchange. Today, contracts in foreign markets are concluded in dollars. This currency has the highest liquidity and convertibility.

Conclusion

Today, both paper and metal money are used in circulation. The latter, however, are not made of gold. The front part of metal money is called the obverse, the reverse part is called the reverse. The edge of a coin is called a edge. To prevent various kinds of damage, the edge of metal money was made rifled. In modern conditions, the central banks of states issue banknotes of a certain denomination. At their core, they act as a national currency that operates on the territory of a particular country. In the manufacture of special paper is used. Protections are used to protect against falsification. With the development of market relations, money has become of paramount importance. The time when goods were exchanged for goods is a thing of the past. However, the practice of barter transactions still exists today. Nevertheless, money circulation is considered a priority in economic transactions. Finance provides many opportunities for both the population and organizations. The availability of funds acts as a prerequisite for the registration of legal entities. This is especially true for financial institutions. According to the volume of own capital, the stability of the enterprise in the market, its solvency, and readiness to repay obligations are assessed. Equally important is money for the population. Many citizens use their funds to purchase certain products or services. Part of the population seeks to accumulate money to ensure financial independence in the coming periods. The priority of savings or spending is often set depending on the economic situation both within the country and in the world. Equally important in this case are the rates of stable "indicative" currencies. These include, in particular, the euro and the dollar. There is no doubt that financial well-being, a sufficient level of solvency of the population, enterprises, the state as a whole reflects the general well-being of citizens, the quality of life, and working conditions in the country. The higher they are, the more opportunities the state has, the more stable the economy, the easier it is to survive any negative impacts.