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74K. 23M views 6 years ago Math Songs for Kids. Money Song by Jack Hartmann helps your children learn to identify and know the value of a penny, nickel, dime and quarter. The Money Song has...
- 3 min
- 23.9M
- Jack Hartmann Kids Music Channel
- Overview
- Functions of money
- Varieties of money
Written byAllan H. Meltzer,
Allan H. Meltzer
The Allan H. Meltzer University Professor of Political Economy, Carnegie Mellon University.
Milton Friedman
Milton Friedman
American economist and educator, one of the leading proponents of monetarism in the second half of the 20th century. Milton Friedman was awarded the Nobel Prize for Economics in 1976. He was Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago; Senior Research Fellow, Hoover Institution, Stanford University, California.
The basic function of money is to enable buying to be separated from selling, thus permitting trade to take place without the so-called double coincidence of barter. In principle, credit could perform this function, but, before extending credit, the seller would want to know about the prospects of repayment. That requires much more information about the buyer and imposes costs of information and verification that the use of money avoids.
If a person has something to sell and wants something else in return, the use of money avoids the need to search for someone able and willing to make the desired exchange of items. The person can sell the surplus item for general purchasing power—that is, “money”—to anyone who wants to buy it and then use the proceeds to buy the desired item from anyone who wants to sell it.
The importance of this function of money is dramatically illustrated by the experience of Germany just after World War II, when paper money was rendered largely useless because of price controls that were enforced effectively by the American, French, and British armies of occupation. Money rapidly lost its value. People were unwilling to exchange real goods for Germany’s depreciating currency. They resorted to barter or to other inefficient money substitutes (such as cigarettes). Price controls reduced incentives to produce. The country’s economic output fell by half. Later the German “economic miracle” that took root just after 1948 reflected, in part, a currency reform instituted by the occupation authorities that replaced depreciating money with money of stable value. At the same time, the reform eliminated all price controls, thereby permitting a money economy to replace a barter economy.
These examples have shown the “medium of exchange” function of money. Separation of the act of sale from the act of purchase requires the existence of something that will be generally accepted in payment. But there must also be something that can serve as a temporary store of purchasing power, in which the seller holds the proceeds in the interim between the sale and the subsequent purchase or from which the buyer can extract the general purchasing power with which to pay for what is bought. This is called the “asset” function of money.
Anything can serve as money that habit or social convention and successful experience endow with the quality of general acceptability, and a variety of items have so served—from the wampum (beads made from shells) of American Indians, to cowries (brightly coloured shells) in India, to whales’ teeth among the Fijians, to tobacco among early colonist...
Jan 22, 2024 · Learn how money evolved from bartering to commodity money to fiat money, and how it is measured and created. Explore the characteristics and functions of money as a medium of exchange, a unit of account, and a store of value.
The history of money is the development over time of systems for the exchange, storage, and measurement of wealth. Money is a means of fulfilling these functions indirectly and in general rather than directly, as with barter. Money may take a physical form as in coins and notes, or may exist as a written or electronic account.
Learn how money serves as a medium of exchange, a unit of account, and a store of value. Explore the difference between commodity money and fiat money, and the role of the Federal Reserve System in measuring the money supply.
4 days ago · Learn how money evolved from a system of direct trade to a medium of exchange with a recognized value. Explore the origins and developments of coins, paper currency, and digital currencies across the world.
Learn how money evolved from natural objects to coins, paper, and credit cards. Explore the origins, uses, and challenges of currency across time and cultures.
