A measure of value is The function of money as a measure of value

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

It's no secret that money, in fact, is in the process of circulation of goods a means of realizing their value. This means that the starting and at the same time the key function in the system of monetary relations is the function of the measure of value. What is it? What are its main features? Is this topic relevant today?

Defining aspect of the measure of value

A measure of value is the most important function of money, which allows you to qualitatively change and correctly express the value of an object in monetary terms. Thus, a price form is assigned to a specific item. The influence of this function does not depend in any way on the government bodies of any country. The scale of the price serves as an expression of the value of the object and is purely legal.

The function of money as a measure of value has a very interesting feature, which is its ability to correctly measure the cost of labor resources, to recombine a certain share of the national income (for example, in the case of a mismatch of prices with value), and alsocorrectly evaluate goods through a pricing system.

Price, measure of value and their main features

Like any other function of money, the measure of value is endowed with specific and non-specific features. Firstly, this function can only be performed by full-fledged money, and the form of recognition of money as a measure of value is the price. Thus, in the case of balancing goods and a certain amount of money, it is possible to change the value in a quantitative way. Secondly, a measure of value is a function that allows you to fully carry out planning and accounting, perform distribution operations on a social product, and also calculate aspects of the cost of production. Thanks to it, today it is not difficult to maintain high-quality links between various economic entities (for example, enterprises and employees, enterprises and intermediaries, or two enterprises of a similar orientation in terms of production and sales of products).

Money acts as a measure of value

Relying on the information presented in the previous chapters, it is possible to give a detailed and most accurate definition of the concept under consideration. Thus, the measure of value is an economic function of money, the activity of which is in no way connected with the state. The scale of prices is endowed with a legal character and expresses nothing more than the price of a commodity. For a competent determination of the cost of fixed assets, the cost measure requires the simultaneous implementation of the following conditions:

• Absolute equality in terms ofpricing relative to the overall economic space.
• A decent degree of development of such categories as market relations and competition.
• Relative stability of the national currency.
• Equivalence in terms of exchange.

History Pages

A measure of value is a category in which the main focus is on gold. After all, the key function of the metal is to fully ensure the monetary determination of the price of goods, to make them comparable with each other both in qualitative and quantitative terms. Over time, society preferred to abandon gold, thereby transferring the function considered in the article to a more convenient equivalent, money. This has resulted in an easy-to-use circulation system.

It is important to note that today absolutely every country has an individually set measure of cost (this aspect is called price scaling and is discussed below). For example, in the United States, the national currency (US dollar) serves as a measure of value, in Mexico - the peso, in Japan - the yen, in Russia - the ruble, and so on.

Fundamentals of the formation of a measure of value

As it turned out, today it is possible to measure the cost of absolutely all objects using national monetary units (see above: a measure of value is …). It is in this way that the most important ability of money is manifested - to act as a measure of value and as an intermediary in the process of itsdefinitions. Once upon a time, no one knew about paper money - ordinary goods served as their replacement. Thus, the appearance of an equivalent price for the monetary units of the goods (of course, taking into account certain laws of value) was ensured in a one-time manner. In addition, both the objects of the transaction (concrete things) and money had a common basis for comparison, which was labor (it should be noted that this concept is abstract). This means that through the function of the measure of value, the commodity can be related to money in the same way as to the general equivalent. To resolve this issue, it is important to correctly determine the scale of prices.

The concept of price scale

A price scale is nothing more than an object for determining the value of a commodity in terms of money. This concept consists in a strict fixation of the weight ratio of gold (as a monetary metal) to the domestic currency (called the national currency) in a particular country. At a time when commodity production was actively practiced, banknotes could be exchanged in various markets (both within a particular state and in the international arena). Naturally, in the process of transition to a currency of a non-material nature, this function was leveled: credit funds can perform an exclusively representative function, that is, serve as a means of account.

Inflation and the measure of value

It should be noted that the measure of the cost of goods is a component of the most important system, of which inflation is also considered a part (it plays a decisive role in the process of cheapening money). A striking example of this phenomenon can serve as the price of travel in public transport. Let's say you have 100 rubles. In fact, nothing changes in the nominal plan, but upon real consideration of the situation, it turns out that last year this money could buy 10 travel coupons, and this year only 8 or 7.

History reminds us that hyperinflation took place in Russia in the 1990s. Then the money was subject to depreciation at a breakneck pace. Even students at that time tried to spend their own scholarship as quickly as possible, because during a monthly period this amount could easily lose a significant part of it. But already after 1998, inflation of approximately 20% can be observed in the country annually, and the crisis of 2008-2009 gave impetus to stabilize inflation at 7-8 percent.

What else?

When the socialist system took place in Russia and market mechanisms did not function at all, there was no inflation a priori. However, there was a deficit, which implied hidden inflation.

It should be added that in the economy there is such a thing as deflation, but in Russia it has never been observed. The only thing is that it may be appropriate in August-September, because it is then that the prices for vegetables fall. Inflation peaks in January. It is during this time period that the natural monopolies significantly increase tariffs, which leads to higher prices in other industries as well. An interesting fact is the significant impact on the inflationarythe process of economic growth. So, if it is high enough, then inflation reaches the corresponding indicators.