The Characteristics Of Money 541l42

The characteristics of money can be divided into six different categories: Durability, portability, divisibility, uniformity, limited supply, and acceptability. With the ongoing fraudulent issues associated with counterfeit money, it is important to be familiar with these categories. Acceptability: In of a form of currency being accepted within society, money must be accepted by everyone in the economy. This acceptance is for the purpose of the exchange of money for goods and different types of services. Divisibility: This relates to money being easily divided into smaller denominations for transactional purposes. People will only need as much money as is necessary for their purchases, therefore it is necessary for money to be easily broken down for different types of transactions. Durability: This simply refers to the physical wear and use of money over a period of time. If some money is easily destroyed or damaged it is likely that it is fraudulent and therefore cannot be trusted. Yet, money is made from a paper source, so some wear and tear must be expected. Limited supply: In order for money to retain its worth, there must be a type of limited supply. The more money that is in circulation the less it is valued by the economy. Portability: Quite simply it is necessary for money to be easily transported so that people can carry it around with them on a daily basis. This also allows for the ease of transaction so that money can be transferred from one place to another. Uniformity: Depending on the different types of currency that are available, money within that specific currency must look the same. This also allows for money to be counted and measured accurately. An alternative way for distinguishing the characteristics of money is that it is easily recognized. Money is subject to the type of currency that is in circulation within a specific place, so if it is easily recognized and it follows the above characteristics, then it is likely to be genuine.

Description This section is from the book "Elementary Economics", by Charles Manfred Thompson. Also available from Amazon: Elementary Economics.

Physical Characteristics Of A Good Money Scarcely less important are the physical characteristics which a good money should possess. Five such characteristics may properly be examined at this point: (1) durability, (2) portability, (3) homogeneity, (4) divisibility, and (5) cognizability. Any commodity that is to serve well as money should possess durability to a high degree. Otherwise it would wear quickly in its age from hand to hand, and even deteriorate while in the possession of its owner. Consequently, perishable goodsj such as cattle, furs, tobacco, and even wheat and corn, have never proved satisfactory as mediums of exchange. Clearly, durability is a great aid to stability of value, since the new supply of a durable commodity for a reasonably short period of time is likely to be small compared to the entire stock of that commodity already in the possession of society. If wheat, for

example, were used as a medium of exchange, it is obvious that its value would fall greatly with the harvesting of each new crop and rise as each crop was gradually consumed. The second physical characteristic of a good money is portability. The commodity that serves as money must be moved from point to point, among the of the society that uses it. Otherwise it is not money. This movement involves labor and expense. Hence, the commodity that combines greatest value in the smallest bulk, if we consider portability alone, is the most desirable as a medium of exchange. A good money must also be homogeneous - that is, the commodity from which it is made must be of the same quality wherever it is found. Obviously, cattle possess this characteristic to a very low degree, for scarcely any two of them are alike. Divisibility, which is closely related to homogeneity, simply means the capability of a commodity to be divided without destroying its value. Here again, cattle do not possess this characteristic. Neither do furs or diamonds. Either loses value by being divided. The total value of the parts of a split diamond never equals the value of the original stone. Any commodity that is to current as money must be capable of being easily recognized. Otherwise it could be counterfeited, which fact in itself would tend to destroy its value as a money by destroying its acceptability.

Characteristics of Good Money General Acceptability: The good money is one which is generally acceptable by all without anyhesitation. It means that anyone will be willing to readily accept it in the settlement of debt or in discharge of any obligation. Stability: The value of money should stay stable otherwise people will loo.se confidence over it. It means mat the commodity chosen as money must not depreciate due to usage or wear and tear. Standardized: The good money is of standardized nature and quality of its material does not undergo any great change, it must not be weak in such a m'ahner mat may leose its . original form and shape due to any mishandling or change of temperature. •Economical: The issuances of good money should always-be economical. ThiS' means that cost incurred on its issuance must be very low as compared to its valife. Taking a simple example we can say that issuance of one rupee note would be economical for Pakistan government if cost of printing a note is less than one rupee. Storability: A A good niondy is one iri the shape 6ft which purchasing power can be stored for a longer period. This means that people artist be able to save the money value considerable surety that it will not lose its value. Divisibility: A good money is capable of being divided into smaller denominations.Hence both the costly and cheap things' can be purchased from such money Transportability:

A good money, is easily transferable fomi one place to another. Paper money is the best example .of this. Not only it can be transferred easily over long distances but we also have different modes of transferring it such as cheques, pay orders, drafts, TC'c etc, Recognizable;. Good money is one that can be-easily recognized by seeing or touching. It shouldbe of such a nature that can be easily identified by anyone.. Moreover different denominations should be in different colour or size in order to avoid any confusion. Difficult to Copy: A good money is one. which.is very difficult to be,copied. In. other-words there should be no danger of fake issuance. There must be certain mark on it which can be easily identified by everyone and which can also be used to determine its originality Easily Meltable: A good eurrency can be conveniently kept and stamped. Malleability is mainly a quality of metal coins. The metal coins can be melted and reproduced with new. government seals. So sucft a material that cannot be .melted is not fit for making coins. Paper currency is also malleable in a sense that it can recycled to produce new notes Elasticity: The supply of money should remain elastic. It means that it should respond to the general needs of the economy. It must be of such a nature that its supply can be increased, or decreased to satisfy the requirements of the economy. Element of Supervision: A good money is. one that can be effectively supervised by a central monetary authority, It is, of such .a nature mat central authority is able to keep records of the amount of money in circulation and the pattern of its distribution Scarcity: A good money should be scarce in quantity. Its quantity in the economy should be kept low as compared to the desire for it. This implies that people witt always be working hard to*ara mow money in order to meet requirements of life. Conclusion: .. These are the characteristics of an ideal money. The paper currency conforms to majority &f .these standards. However the biggest drawback of our paper currency is that it is exposed to inflation due to which is losing its value over time.