Functions And Forms Of Money In Economy

You encounter money everywhere in everyday life. When most people think of the word “money”, they first think of coins and banknotes. You talk about “making money” when it comes to your income. You talk about “spending money” when you shop. With larger purchases, it happens that you “borrow money”, i.e. have to take out a loan, be it from a circle of friends or from a bank.

When it comes to forex and crypto, you use the money to trade. You want to earn money as an investor. Thus, you view aaafx review to play an important role when it comes to long-term success in trading.

This very different use of the term “money” is no coincidence. It is an expression of the many functions that money has in economic life.

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Trading services: The role of money in the division of labor economy

Money facilitates the exchange of goods and services in modern economies characterized by a high degree of division of labor and specialization.

Without money, there would be a barter economy.

If there were no money, people in societies that have built their economic life on exchange relationships would have to exchange goods directly. You would have to find a person who offers exactly what you are looking for. At the same time, this person would have to need exactly what you want to exchange yourself. If nobody can be found to swap directly, sometimes long chains of swapping would be necessary until everyone gets what they need. In addition, the exchange ratios of each good to each other would have to be laboriously determined.

The generally recognized and accepted “intermediate exchange commodity” money, on the other hand, makes trading easier. The double exchange of “goods for money” and “money for goods” takes the place of the simple exchange of “goods for goods”. With money, the purchase and sale of goods can also differ in terms of time and place. In addition, money is a general measure by which the value of any good can be expressed and easily compared.

Money as a unit of account

Money simplifies economic life considerably because it makes the value of goods comparable via a unit of account. Without money, the individual exchange ratios would have to be determined.

Money plays an essential role in modern economies. It enables trade and supports the division of labor economy.