Money is a medium of exchange that facilitates trade and economic activities. In Class 9, the topic Key Characteristics of Money explains the essential features that make money universally acceptable, durable, portable, divisible, and stable in value.
Key Characteristics of Money Class 9 Notes
Medium of Exchange
Money is called a medium of exchange because it helps people buy and sell goods and services easily. Money helps bring simplicity and organisation to our economy. The most important thing about money is that everyone should be willing to use and accept it.
Standard of Value or a Unit of Account
Money acts as a standard of value or unit of account, meaning money provides a common measure to set prices for goods and services. For example, suppose you want to buy a computer; the previous time it was difficult to understand how many bags of rice I had to give in exchange for the product. But now if I want to buy a computer and the price is 20000, it means that the standard value of the computer is 20000 for anyone who wants to buy the computer.
Store of value
Money has a third function, as a store of value. Rather than spending the money today, you can store it for future use. For example, suppose you want to buy an apple, but you don’t want to spend all your income immediately; you want to save it for further use. It is possible with money but not possible for apples if you spend all of your income and want to store them for the future.
Money helps our homes to run and our economy to work more smoothly. It simplifies the trading process. It enables us to save for the future. However, shells or breads would not work particularly well as money. At an earlier time, in a simpler economy, they could and did.
There are some general characteristics for acceptability as money.
- First, to serve as an effective medium of exchange, money must be durable and not get damaged easily.
- Second, money should be limited so it has value but not be so rare that people cannot use it.
- Third, money must be available in enough quantity to allow people to trade easily.
- Fourth, money should be easy to carry and easy to move.
- And last, money must be divisible into usable quantities or fractions.
Money is most important. It must be readily accepted by people in the economy. Today, money as a medium of exchange has taken the form of paper currency, coins and plastic currency.
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