Money is considered to be commodity or unit of exchange? What are the important functions of money explain briefly? How to relate it with your Pakistani society?
Money is considered to be commodity or unit of exchange? What are
the important functions of money explain briefly? How to relate it with your
Pakistani society?
Money is used as an expression for wealth in general. It is an important part of the economic studies as it is regarded as a widely accepted unit of transaction. Prior to the usage of money as an economic unit, the barter system prevailed in the primitive society for the exchange of goods and services. As society moved from its subsistence habits towards exchange, there was an increase in the specialization, division of labor, production, and trade. Because of this progress, there was an increased demand for such a unit that made the process of exchange both accountable and measurable in nature.
The concept and use of money as an accepted mode of payment have made transactions easier. Money has segregated the process of transactions into sale and purchase. It does not merely denote an exchange process. Due to the expansion of economic activities, the role of money also expanded in the following ways-
Money as a commodity:
Money was considered to be a physical commodity throughout historic times. It was due to the fact that major transactions were carried out by using precious metals such as gold, silver, beads, pearls, gems, etc. These items had a higher intrinsic value and were therefore preferred to be used for exchange purposes. The users generally associated and recognized the utility of such items and widely desired them due to their durability and portable nature.
Money as a unit of exchange:
Money is considered as a unit of exchange as it gives a numerical value to all the transactions. It simplifies the measurement and comparison between the prices of goods and services over time and across various regions. By knowing the numerical value, better economic decisions can be made for exchange purposes by both the buyers and the sellers.
Therefore, money is considered to be both a commodity as well as a unit of exchange.
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