Money is any object or record that is generally accepted as payment for goods and services and repayment of debts

in a given socio-economic context or country.[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment.[4][5] Any kind of object or secure verifiable record that fulfills these functions can be considered money. Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money.[4] Fiat money, like any check or note of debt, is without intrinsic use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private"[citation needed]. Such laws in practice cause fiat money to acquire the value of any of the goods and services that it may be traded for within the nation that issues it. The money supply of a country consists of currency (banknotes and coins) and bank money (the balance held in checking accounts and savings accounts). Bank money, which consists only of records (mostly computerized

in modern banking), forms by far the largest part of the money supply in developed nations.[6][7][8]

The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located.[9] The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique). In the Western world, a prevalent term for coinmoney has been specie, stemming from Latin in specie, meaning 'in kind The use of barter-like methods may date back to at least 100,000 years ago, though there is no evidence of a society or economy that relied primarily on barter.[11] Instead, non-monetary societies operated largely along the principles of gift economics and debt.[12][13] When barter did in fact occur, it was usually between either complete strangers or potential enemies.[14]

Many cultures around the world eventually developed the use of commodity money. The shekel was originally a unit of weight, and referred to a specific weight of barley, which was used as currency.[15] The first usage of the term came from Mesopotamia circa 3000 BC. Societies in the Americas, Asia, Africa and Australia used shell money often, the shells of the cowry (Cypraea moneta L. or C. annulus L.). According to Herodotus, the Lydians were the first people to introduce the use of gold and silver coins.[16] It is thought by modern scholars that these first stamped coins were minted around 650600 BC.[17]

Song Dynasty Jiaozi, the world's earliest paper money The system of commodity money eventually evolved into a system of representative money.[citation

needed]

This occurred because gold and silver merchants or banks would issue receipts to their depositors redeemable for the commodity money deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi", evolved from promissory notes that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. In the 13th century, paper money became known in Europe through the accounts of travelers, such as Marco Polo and William of Rubruck.[18] Marco Polo's account of paper money during the Yuan Dynasty is the subject of a chapter of his book, The Travels of Marco Polo, titled "How the Great Kaan Causeth the Bark of Trees, Made Into Something Like Paper, to Pass for Money All Over his Country."[19] Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The gold standard, a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made legal tender, and redemption into gold coins was

discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold. After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended the convertibility of the US dollar to gold. After this many countries de-pegged their currencies from the US dollar, and most of the world's currencies became unbacked by anything except the governments' fiat of legal tender and the ability to convert the money into goods via payment. BARTER What is a Barter System? A barter system is an old method of exchange. Th is system has been used for centuries and long before money was invented. People exchanged services and goods for other services and goods in return. Today, bartering has made a comeback using techniques that are more sophisticated to aid in trading; for instance, the Internet. In ancient times, this system involved people in the same area, however today bartering is global. The value of bartering items can be negotiated with the other party. Bartering doesn't

involve money which is one of the advantages. You can buy items by exchanging an item you have but no longer want or need. Generally, trading in this manner is done through Online auctions and swap markets. History of Bartering The history of bartering dates all the way back to 6000 BC. Introduced by Mesopotamia tribes, bartering was adopted by Phoenicians. Phoenicians bartered goods to those located in various other cities across oceans. Babylonian's also developed an improved bartering system. Goods were exchanged for food, tea, weapons, and spices. At times, human skulls were used as well. Salt was another popular item exchanged. Salt was so valuable that Roman soldiers' salaries were paid with it. In the Middle Ages, Europeans traveled around the globe to barter crafts and furs in exchange for silks and perfumes. Colonial Americans exchanged musket balls, deer skins, and wheat. When money was invented, bartering did not end, it become more organized. Due to lack of money, bartering became popular in the 1930s during the Great Depression. It was used to obtain food and various other services. It was done through groups or between people who acted similar to banks. If any items were sold, the owner would receive credit 1. Want of Coincidence:

The first difficulty in the barter system of exchange is that there has to be a double coincidence of wants. Two persons can have barter exchange only if their disposable possessions mutually suit each other's needs. In barter trading, thus, two parties must agree on their mutual exchange, which is possible only if there exists a double coincidence of wants. That is, one party must want a commodity which the other party wants to dispose of and the former must have disposable possession of the commodity that is desired in exchange by the latter. In a barter, therefore, a person who wants to exchange his goods for some other goods has not only to find another person who possesses what he needs but who, at the same time, has a desire for what he has to offer. In practice, it is difficult always to have such double coincidence of wants and, therefore, there are delays in transactions, and a considerable amount of time and effort is wasted in effectuating the exchanges. Clearly, trade and business cannot develop rapidly in a barter economy for want of coincidence. Barter as such is a high barrier to economic progress. 2. Lack of a Common Measure of Value:

Another serious difficulty of the barter is that it lacks any common measures of value or unit of account. In the absence of a well-defined unit of account, in barter, the values of goods are measured in a relative sense; hence there is no absolute measurement of value. Since the value of each commodity can be expressed in terms of every other commodity, one has to remember a large number of cross relations of values in exchange for different goods which is physically impossible to do when there are an infinite number of commodities. Under such conditions, no meaningful accounting system can be evolved. 3. Want of a Means of Sub-division: Barter exchange also suffers from a severe inconvenience on account of indivisibility of many kinds of goods. One can easily portion out a bag of food-grains, a basket of fruits, etc. which are divisible goods and can give more or less in exchange for what is wanted. But, the real difficulty arises in the process of exchange between indivisible and divisible goods. For instance, a horse is not divisible and cannot be exchanged in parts against different divisible goods like rice, sugar, potatoes, etc. thus, barter trade

between divisible and indivisible goods in small values cannot be carried on without a loss of value. In a barter system, smooth exchange operations are impossible for want of a means of sub-dividing and distributing values according to people's varying requirements. 4. Lack of Standard of Deferred Payments: Another drawback of barter is that it lacks a standard of deferred payments, so that contracts involving future payments or loan transactions cannot take place with ease in such a system. Credit transactions cannot be promoted smoothly under barter trading. Chance of controversy about the quality of goods or services to be repaid can arise. There will be no easy agreement on the mode of repayment. Credit transactions would also involve high risks to both parties as the real value of a commodity to be repaid may drastically increase or decrease in future. 5. Lack of Efficient Store of Value: Perhaps, a major inconvenience of barter is the lack of facility to store value or the lack of existence of a generalised purchasing power. Under barter, people can store value for future use by storing wealth, but

the difficulty arises when wealth consists of perishable goods. Moreover, the store of value in terms of real wealth involves cost and further, the problem of storing the goods arises. In addition, bulky goods cannot be easily exchanged for other goods as and when required. A quick exchange sometimes involves a heavy loss, too. It follows that the barter economy is a highly inefficient economy of exchange. With the progress of civilisation and economic expansion, these difficulties and inconveniences of the barter system become more pronounced. To overcome these drawbacks, some kind of money was invented and evolved in every society and the buyer's account would be debited. 1. Hard to determine prices: A barter system requires a complex matrix and is a mind-boggling system as the number of products in the market grows. Although price determination could be solved by today's computers, it is still hard for the humans involved to grasp all of that. EVOLUTION OF MONEY

The history of money concerns the development of means of carrying out transactions involving a physical medium of exchange. Money is any clearly identifiable object of value that is generally accepted as payment for goods and services and repayment of debts within a market or which islegal tender within a country. Many things have been used as medium of exchange in markets including, for example, livestock and sacks of cereal grain (from which the Shekel is derived) things directly useful in themselves, but also sometimes merely attractive items such as cowry shells or beads were exchanged for more useful commodities. Precious metals from which early coins were made fall into this second category. Numismatics is the scientific study of money and its history in all its varied forms. Anatolian obsidian as a raw material for stone-age tools was distributed as early as 12,000 B.C., with organized trade occurring in the 9th millennium.(Cauvin;Chataigner 1998)[10] In Sardinia, one of the four main sites for sourcing the material deposits of obsidian within the Mediterranean, trade in this was replaced in the 3rd millennium by trade in copper and silver.[11][12][13][14]

As early as 9000 BC both grain and cattle were used as money or as barter (Davies) (the first grain remains found, considered to be evidence of preagricultural practice date to 17,000 BC).[15][16][17] The importance of grain with respect to the value of money is inherent in language where the term for a small quantity of gold was "grain of gold".[18][19] In the earliest instances of trade with money, the things with the greatest utility and reliability in terms of re-use and re-trading of these things (their marketability), determined the nature of the object or thing chosen to exchange. So as in agricultural societies, things needed for efficient and comfortable employment of energies for the production of cereals and the like were the most easy to transfer to monetary significance for direct exchange. As more of the basic conditions of the human existence were met to the satisfaction of human needs,[20] so the division of labour increased to create new activities for the use of time to solve more advanced concerns. As peoples needs became more refined, so indirect exchange became more likely as the physical separation of skilled labourers (suppliers) from their prospective clients (demand) required the use of a medium common to all communities, to facilitate a wider market.[21][22]

Aristotle's opinion of the creation of money[4] as a new thing in society is: When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use.[23] The worship of Moneta is recorded by Livy with the temple built in the time of Rome 413 (123); a temple consecrated to the same god was built in the earlier part of the fourth century (perhaps the same temple).[24][25][26] The temple contained the mint of Rome for a period of four centuries.[27][28] Early administration[edit] The Code of Hammurabi, the best preserved ancient law code, was created ca. 1760 BC (middle chronology) in ancient Babylon. It was enacted by the sixth Babylonian king, Hammurabi. Earlier collections of laws include the code of Ur-Nammu, king of Ur (ca. 2050 BC), the Code of Eshnunna (ca. 1930 BC) and the code of Lipit-Ishtar of Isin (ca. 1870 BC).[29] These law codes formalized the role of money in civil society. They set amounts of interest on debt... fines for 'wrongdoing'... and compensation in money for various infractions of formalized law. The Mesopotamian civilization developed a large scale economy based on commodity money.

The Babylonians and their neighboring city states later developed the earliest system of economics as we think of it today, in terms of rules on debt,[8] legal contracts and law codes relating to business practices and private property. Money was not only an emergence, it was a necessity.[30][31] Early usage[edit] The earliest places of storage were thought to be money-boxes containments ( -[32]) made similar to the construction of a bee-hive,[33][34] as of the Mycenae tombs of 15501500 BC.[35][36][37] An early type of money were cattle, which were used as such from between 9000 to 6000 BCE onwards (Davies 1996 & 1999)[38][39] Both the animal and the manure produced were valuable; animals are recorded as being used as payment as in Roman law where fines were paid in oxen and sheep (Rollin 1836)[40][41][42] and within the Iliad and Odyssey, attesting to a value c.850 800 BCE (Evans & Schmalensee 2005).[43][44] It has long been assumed that metals, where available, were favored for use as proto-money over such commodities as cattle, cowry shells, or salt, because metals are at once durable, portable, and easily divisible.[45] The use of gold as proto-money has been traced back to the fourth millennium BC when the Egyptians used gold bars of a set weight

as a medium of exchange,[citation needed] as had been done earlier in Mesopotamia with silver bars.[citation
needed]

The first mention of the use of money within the Bible is within the book "Genesis"[46] is in reference to criteria of the circumcision of a bought slave. Later, the Cave of Machpelah is purchased (with argentum[47][48]) by Abraham,[49] during a period dated as being the beginning of the twentieth century B.C.E.,[50] some-time recent to 1900 B.C.E.[51] (after 1985).[52] The currency was also in use amongst the Philistine people of the same timeperiod.[53] The shekel was an ancient unit[54] used in Mesopotamia around 3000 BC to define both a specific weight of barley and equivalent amounts of materials such as silver, bronze and copper. The use of a single unit to define both mass and currency was a similar concept to the British pound, which was originally defined as a one pound mass of silver. A description of how trade proceeded includes for sales the dividing (clipping) of an amount from a weight of something corresponding to the perceived value of the purchase. Of this the ancient Greek term was . From this one might understand the development of how coinage was imagined from

the small metallic clippings (of silver[55][56][57]) resulting from trade exchanges.[58] The word used in Thucydides writings History for money is chremata, translated in some contexts as "goods" or "property", although with a wider ranging possible applicable usage, having a definite meaning "valuable things".[59][60][61][62] The first gold coins of the Grecian age were struck in Lydia at a time approximated to the year 700 B.C.E.[63] The talent[54][64] in use during the periods of Grecian history both before and during the time of the life of Homer, weighed between 8.42 and 8.75 grammes.[65] (p. 3 Seltman) --------------------------------------------------------------------functioIn Money and the Mechanism of Exchange (1875), William Stanley Jevons famously analyzed money in terms of four functions: a medium of exchange, acommon measure of value (or unit of account), a standard of value (or standard of deferred payment), and a store of value. By 1919, Jevons's four functions of money were summarized in the couplet: "Money's a matter of functions four, a Medium, a Measure, a Standard, a Store."[20] This couplet would later become widely popular in macroeconomics textbooks.[21]ns of money

PRIMARY 1. Medium of Exchange: The most important function of money is to serve as a medium of exchange or as a means of payment. To be a successful medium of exchange, money must be commonly accepted by people in exchange for goods and services. While functioning as a medium of exchange, money benefits the society in a number of ways: (a) It overcomes the inconvenience of baiter system (i.e., the need for double coincidence of wants) by splitting the act of barter into two acts of exchange, i.e., sales and purchases through money. (b) It promotes transactional efficiency in exchange by facilitating the multiple exchange of goods and services with minimum effort and time, (c) It promotes allocation efficiency by facilitating specialization in production and trade, (d) It allows freedom of choice in the sense that a person can use his money to buy the things he wants most, from the people who offer the best bargain and at a time he considers the most advantageous. 2. Measure of Value:

Money serves as a common measure of value in terms of which the value of all goods and services is measured and expressed. By acting as a common denominator or numeraire, money has provided a language of economic communication. It has made transactions easy and simplified the problem of measuring and comparing the prices of goods and services in the market. Prices are but values expressed in terms of money. Money also acts as a unit of account. As a unit of account, it helps in developing an efficient accounting system because the values of a variety of goods and services which are physically measured in different units (e.g, quintals, metres, litres, etc.) can be added up. This makes possible the comparisons of various kinds, both over time and across regions. It provides a basis for keeping accounts, estimating national income, cost of a project, sale proceeds, profit and loss of a firm, etc. To be satisfactory measure of value, the monetary units must be invariable. In other words, it must maintain a stable value. A fluctuating monetary unit creates a number of socio-economic problems. Normally, the value of money, i.e., its purchasing power, does not remain constant; it rises during periods of falling prices and falls during periods of rising prices.

SECONDARY 3. Standard of Deferred Payments: When money is generally accepted as a medium of exchange and a unit of value, it naturally becomes the unit in terms of which deferred or future payments are stated. Thus, money not only helps current transactions though functions as a medium of exchange, but facilitates credit transaction (i.e., exchanging present goods on credit) through its function as a standard of deferred payments. But, to become a satisfactory standard of deferred payments, money must maintain a constant value through time ; if its value increases through time (i.e., during the period of falling price level), it will benefit the creditors at the cost of debtors; if its value falls (i.e., during the period of rising price level), it will benefit the debtors at the cost of creditors. 4. Store of Value: Money, being a unit of value and a generally acceptable means of payment, provides a liquid store of value because it is so easy to spend and so easy to store. By acting as a store of value, money provides security to the individuals to meet unpredictable emergencies and to pay debts that are fixed in terms

of money. It also provides assurance that attractive future buying opportunities can be exploited. Money as a liquid store of value facilitates its possessor to purchase any other asset at any time. It was Keynes who first fully realised the liquid store value of money function and regarded money as a link between the present and the future. This, however, does not mean that money is the most satisfactory liquid store of value. To become a satisfactory store of value, money must have a stable value. 5. Transfer of Value: Money also functions as a means of transferring value. Through money, value can be easily and quickly transferred from one place to another because money is acceptable everywhere and to all. For example, it is much easier to transfer one lakh rupees through bank draft from person A in Amritsar to person B in Bombay than remitting the same value in commodity terms, say wheat. CONTENTARY6. Distribution of National Income: Money facilitates the division of national income between people. Total output of the country is jointly produced by a number of people as workers, land

owners, capitalists, and entrepreneurs, and, in turn, will have to be distributed among them. Money helps in the distribution of national product through the system of wage, rent, interest and profit. 7. Maximization of Satisfaction: Money helps consumers and producers to maximize their benefits. A consumer maximizes his satisfaction by equating the prices of each commodity (expressed in terms of money) with its marginal utility. Similarly, a producer maximizes his profit by equating the marginal productivity of a factor unit to its price. 8. Basis of Credit System: Credit plays an important role in the modern economic system and money constitutes the basis of credit. People deposit their money (saving) in the banks and on the basis of these deposits, the banks create credit. 9. Liquidity to Wealth: Money imparts liquidity to various forms of wealth. When a person holds wealth in the form of money, he makes it liquid. In fact, all forms of wealth (e.g., land, machinery, stocks, stores, etc.) can be converted into money. IMPORANCE

Money is an essential and basic necessity in a modern economy. In the beginning of human existence, human needs were so simple that they could be satisfied by barter system , i.e., exchange of goods for goods. In baster system, an individual produces some goods in greater quantity than what he could consume and then exchanges the extra units with another individual for something he needed in return. Barter system suffered from lack of double coincidence of wants, lack of common measure of value, difficulty in stored of extra goods and indivisibility of goods. The main advantage of using money is that it decomposes a single barter transaction into two separate transaction of Sale andPurchase. People can hold their wealth in the form of money as a generalised purchasing power which can be utilised to buy goods and services as and when they desire. Money s a pivot around which the whole economy revolves. It alone has the power to buy things directly in the market. It does not require to be spent. All economic systemCapitalist, Socialist and Maixed-need money. 1. Money may not produce anything, but without it, nothing can be produced. 2. With the help of money, consumers make payment for goods and services.

3. With the help of money, producers can but raw material, plant and machinery. They can settle their debts and pay corporate taxes. 4. Money has contributed to economic growth all over the world because it has removed trade barriers. 5. With the help of money, government realises all taxes, fees, fines, penalties and other sources of public revenue. Thus, money can serve mankind if it is controlled and regulated. But if it goes out of control, it can lead to disastrous consequences. It is rightly said that "money is a good servant and a bad master". Money occupies a central position in our modern economy. Money is everywhere and for everything in the modern economic life. Money has become the religion of the day in the ordinary business of life. Every branch of economic activity in a money economy is basically different from what it would have been in a barter economy. Money has created a far reaching effect on all facets of economic activities; consumption, production, exchange and distribution, as also on public finance and economic welfare. Money and Consumption

Money enables a consumer to generalize his purchasing power. It gives him command over a wide variety of goods. It enables him to canalize his purchasing power and get what he wants. In fact, it is money through its immense purchasing power that makes a consumer sovereign in a capitalist economy. The consumers sovereignty can be expressed through money spending. Money provides freedom of choice of consumption. Money and the price mechanism help a consumer to allocate his income over goods in such a way so that he derives maximum satisfaction from his consumption. Money and Production The introduction of money has made present day mass production possible. Without money, production on a large scale would be impossible. The benefits of money in production are as follows

Money has made extreme division of labour possible. Intensive specialization is necessary for large scale production. Money is the very essential for modern enterprise. Entrepreneurs are concerned, while planning their production activities, with the cost of production and selling prices together with the resulting profit, all calculated in terms of money.

The use of money enables a producer to concentrate on the organization of the production process. Money provides a basis for supporting more complex methods of organizing production. Money has facilitated borrowing and lending and these are essential in present day production. Credit is the main pillar of modern business. Money is the most liquid and general form of capital which is highly mobile between different regions and industries. Money helps the producer to discover through the price mechanism what buyers want and how much they want, so that he can produce and supply accordingly. In fact, money has changed the basic characteristics of production.