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What is Money? (Part 1)

Posted: March 22, 2010 at 9:26 pm 792 views No Comment

In today’s article you will learn what money is.

In today’s world we all use money on a day to day basis. Have you ever stopped to think what money in fact is?

• Money is a source of exchange
• It has a unit of account

Money is a source of exchange.

All throughout history there has been an exchange system in place. One example is Rome back in 550 B.C.E, salt was exchanged for goods.

Originally a conch shell, which is a marine mollusc with a large brightly coloured spiral, was used in exchange for goods.

Here is the point.

Any object can be used in exchange for goods. When this object is used to trade goods, it is a medium of exchange. When trust is built up in this object it leads it to become important and valued. It then becomes a “money system”.

What about the object we use today?

As we have just said, salt was exchanged for goods; today we use coins and notes.

These coins and notes are recognised “objects” which are accepted in society and trusted.

This leads on to the second point.

Money is a unit of account.

What does this mean?

It is how the “object” is measured or valued- It is what it is worth.

For example, a car sales person wants to sell a second hand car. He puts a value on the car for £2000. A customer walks into the car show room and asks “how much”. £2000 answers the sales man. This price has become the unit of account; it is valued or measured at that price.

In other cultures the unit of measurement may be a different object. For example if goats is the trusted “object” for the exchange, then instead of that motor car having a market value of £2000 it could be worth 100 goats!

Please read part two of the article.
Dave and Paula are financial guides who are always ready to assist you! To get the help you need visit the Wealth Building Strategies web site today.

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