Money: the definition and reasons for the appearance

Money, the definition of which will be discussed below, is often referred to as the market language, because with their help a circulation of resources and goods is carried out. Consumers purchase goods from producers, who then give cash for the resources provided by the population. A properly organized and well-functioning monetary system ensures the stability of national production, price stability and full employment of the population.

So what is money? The economic definition says that this is a measure of the value of goods. It is with the help of money that we measure and compare the cost of various services, of one or another product. But there is also such a thing as "the price of money". It is rather difficult to define it. It all depends on what we mean by the word "money". The fact is that this financial term is multifaceted, and one definition, given above, is impossible to disclose the whole meaning of the word. Let's understand what money is. And what they are.

Such different money. Definition of M1

Neither economists nor officials have agreed on a single opinion on the components of M1. This symbol denotes a money supply consisting of 2 elements:

1. Cash (both paper and metal), which operate all economic entities, except for banking structures.

2. Deposits (check deposits) in savings banks, commercial banks and other savings institutions, to which you can write checks.

Thus, cash is the debt obligations of the state and its departments, and check deposits are liabilities of savings institutions and commercial banks.

What is money? The definition of M2

The official credit agencies proposed a broader wording. M2 = M1 + savings accounts (spotless) + deposit accounts of the money market + time deposits (less than $ 100,000) + mutual funds of the money market. The main point is that all components of the M2 category can easily be converted into check deposits or cash without any losses.

Money: the definition of M3

The third interpretation - M3 - recognizes the fact that time deposits (over $ 100,000), which are usually owned by business structures in the form of certificates of deposit, also can easily apply to check deposits. Such certificates have their own market, where they can be bought or sold at any time. But it is worth remembering the risk of possible losses. Having added time deposits to category M2, we get the third formula for determining money: M3 = M2 + time deposits (over $ 100,000).

Reasons for the appearance of monetary units

The reasons for the emergence lie in the commodity contradiction, or rather in the contradiction between the price of the product and its consumer value:

- at the consumer cost, absolutely all goods are quantitatively incommensurable and qualitatively heterogeneous, and also have a different degree of utility. Pies and boots are not only not similar, but also made by representatives of various professions;

- at a price the goods are quantitatively commensurable and homogeneous. Therefore, in the process of exchange, the most exotic things can be compared and equated.

The internal contradictions of the commodity itself are manifested only in the process of exchange. And it can not be evaluated without placing it on the market. The only way you can measure its price is to compare it to other products. The expression of costs for the production of goods is called the exchange value, the phased development of which leads to the appearance of external polarities, the unfolding of internal commodity contradictions and, in general, to the opposition of money and goods.