Functions of money

Everyone knows that the functions of money reflect the possibilities of their use. In fact, money is the same commodity that is exchanged for another commodity, so they are the universal equivalent, serving the satisfaction of the needs of their owners.

The functions of money are different. One of them is a measure of value. The labor spent on the production of any commodity determines its value, expressed in money, which is called the price. In order to compare the prices of different goods, you need to bring them to a single scale, that is, to determine them the same monetary unit. The scale of prices for metal circulation refers to the weight equivalent of monetary metal adopted for a monetary unit, which serves as the measurement of the prices of various goods.

One of the most important is the function of money as a means of circulation. In the process of direct commodity exchange, buying and selling coincide in time, and in this case there is no gap between them. There are two separate processes in commodity circulation, which are separated in time. A mediator that allows this gap in space and time to overcome, as well as ensure the continuity of commodity production, is money. One of the features of money as a medium of circulation is their actual presence, as well as the short-term participation in the exchange process. Paper and credit money, acting as defective (in relation to gold), can serve as a monetary equivalent.

Money has one more, no less important, function: they act as a means of accumulation and saving. Money provides its owner with the receipt of the desired product and, at the same time, becomes an indicator of public wealth. Every person has a tendency to accumulate money. In the process of metal circulation, excess money was put aside in the form of treasures, and their shortage was replenished therefrom.

With extended commodity production, the above feature of money is a necessary condition for the turnover of capital. Monetary reserves smooth out various kinds of uneven economic life. On a national scale, there is a need to create a gold reserve, the magnitude of which indicates the wealth of this country. This serves to ensure the confidence of residents and non-residents in relation to the national currency.

The next function of money is payment. It is characterized by a one-way money movement. With the help of money, non-cash payments, payment of taxes and various charges, payment of salaries and pensions, scholarships and allowances are made. This role has significantly increased with the development of the credit system.

The function of world money has become relevant with the development of foreign trade relations, international loans, the provision of services to external partners. They are an international payment and purchasing means, a universal indicator of the materialization of social wealth. These days, such functions of money are often performed freely convertible currencies (previously - precious metals).

The functions of money in the economy are diverse. With their help, the formation of prices. They are directly related to the preparation and execution of the budget. With the participation of money, goods and services are sold . Also, with their use, the cost of production and the amount of profit are determined. Without money, it is impossible to perform settlement and loan operations, operations with shares. The estimation of the amount of resources that are involved in the production process also occurs with the help of money. They arise as a result of certain conditions in economic relations and, in turn, contribute to their further development.