Ask someone in the U.S. what he or she paid for something, and that person will respond by quoting a dollar price: “I paid $75 for this radio” or “I paid $15 for this pizza.” People don`t say, “I paid for five pizzas for this radio.” This statement could, of course, be literally true in terms of the opportunity cost of the transaction, but we don`t report prices that way for two reasons. The first is that people don`t come to places like Radio Shack with five pizzas and expect to buy a radio. The other is that the information would not be very useful. Other people may not think about values in terms of pizza, so they may not know what we meant. Instead, we report the value of things in money. But something doesn`t have to have intrinsic value to serve as money. Fiat money is money that an authority, usually a government, has accepted as a medium of exchange. The money – paper money and coins – used in the United States today is fiat money; It has no other value than its use as money. You will notice this mention on each invoice: “This note is legal tender for all debts, public and private.” As financial assets other than verifiable deposits became more liquid, economists had to develop broader measures of money that would correspond to economic activity. In the United States, the final arbiter of what is and is not measured as money is the Federal Reserve System.
Because it is difficult to determine what (and what is not) should be measured as money, the Fed reports several different money supplies, including M1 and M2. Shares, national savings certificates, commercial paper, etc. Fast money cannot buy goods and services directly like cash or bank money, but it can be easily converted into finished money in a short period of time. That`s why it`s called near money. Commodity money is money that has value, apart from its use as money. Mackerel in federal prisons is an example of commodity money. Mackerel could be used to purchase services for other prisoners; They could also be eaten. In recent decades, especially with high interest rates and high inflation in the late 1970s, people have sought and found ways to maintain their financial wealth so that they can earn interest and be easily converted into cash.
For example, it is now possible to transfer money from your savings account to your checking account via an ATM and then withdraw money from your checking account. Thus, many types of savings accounts can be easily converted into foreign currency. What constitutes money is really in its acceptance, not in whether or not it has intrinsic value, or whether or not a government has declared it as such. For example, fiat money tends to be accepted as long as it is not printed too quickly. When this happens, as was the case in Russia in the 1990s, people tend to look for other items that serve as money. In the case of Russia, the US dollar has become a popular form of currency, although the Russian government has always declared the ruble to be its fiat currency. 1. Exchange system: The exchange system is a system in which goods are exchanged for goods. 2. Double coincidence of needs: This means that property belonging to two different people must be useful and necessary to each other. 3.
Money: Money is something that is generally accepted as a medium of exchange and can be converted into other assets without wasting its time and value. 4. Legal definition of money: Legally, money is anything that is legally proclaimed as a medium of exchange. Paper notes and coins (collectively referred to as money) are money in law. 5. FIAT Currency: It is defined as money that is under the “FIAT” (command/authority) of the government to function as money. 6. Functional definition of money: The functional definition of money refers to money as anything that performs four basic functions.
(medium of exchange, standard unit of value, deferred payment standard, store of value) 7. Narrow definition of money: The functional definition of money is a narrow definition of money. It only includes banknotes, coins and demand deposits as money.