Basic Finance | Money
Essentially, money certainly facilitates trade by making it easier to buy and sell goods compared to barter. Yes, it is true. But there are a lot more abstract concepts we need to know. We all think that we already know enough about money. Really ? Let’s find out.
Money serve as three major functions, Medium of Exchange, Unit of account, and Store of Value.
i. Medium of Exchange
Without money, you would have to find something that the seller desired and that could take a long time or likely to be forever….. By serving as a means or medium of exchange, money fulfilling this mutual or double coincidence of wants.
ii. Unit of account
Be the medium of exchange is not enough. There are more questions remain unanswered such as How is that worth? How much money I should pay? How many units I will get? How to set up the prices tags? In a barter world, the number of prices equals the number of pairs of goods. However, barter is not an effective way to trade. Money provides a measurement to measure goods and services.
iii. Store of Value
Money also works as a store of value and as a standard of deferred compensation. For example, if your medium of exchange is egg, you better keeping them safe and fresh.
Finally, I have a question for you.
Do you think NFTs, Bitcoins, or Gold bars also meet the three requirements of money?
Do you trust them as a payment method and the way you get paid for your hard works?
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