Monetary System
Monetary System
i should remind you that these articles are not to be used as the only basis for preparing for the english exam, but as an explanatory/additional material
MONEY, ANY MEDIUM OF EXCHANGE THAT IS WIDELY ACCEPTED IN PAYMENT FOR GOODS AND SERVICES AND IN SETTLEMENT OF DEBTS. MONEY ALSO SERVES AS A STANDARD OF VALUE FOR MEASURING THE RELATIVE WORTH OF DIFFERENT GOODS AND SERVICES. THE NUMBER OF UNITS OF MONEY REQUIRED TO BUY A COMMODITY IS THE PRICE OF THE COMMODITY. THE MONETARY UNIT CHOSEN AS A MEASURE OF VALUE NEED NOT, HOWEVER, BE USED WIDELY, OR EVEN AT ALL, AS A MEDIUM OF EXCHANGE. DURING THE COLONIAL PERIOD IN AMERICA, FOR EXAMPLE, SPANISH CURRENCY WAS AN IMPORTANT MEDIUM OF EXCHANGE, WHILE THE BRITISH POUND SERVED AS THE STANDARD OF VALUE.
Money and the Economy
The functions of money as a medium of exchange and a measure of value greatly facilitate the exchange of goods and services and the specialization of production. Without the use of money, trade would be reduced to barter, or the direct exchange of one commodity for another; this was the means used by primitive peoples, and barter is still practiced in some parts of the world. In a barter economy, a person having something to trade must find another who wants it and has something acceptable to offer in exchange. In a money economy, the owner of a commodity may sell it for money, which is acceptable in payment for goods, thus avoiding the time and effort that would be required to find someone who could make an acceptable trade. Money may thus be regarded as a keystone of modern economic life.
Types of Money
The most important types of money are commodity money, credit money, and fiat money. The value of commodity money is about equal to the value of the material contained in it. The principal materials used for this type of money have been gold, silver, and copper. In ancient time, various articles made of these metals, as well as of iron and bronze, were used as...
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