Evolution and Characteristics of Monetary Systems

The Concept of Commodity Money

The money commodity: A commodity that has the same value as a monetary unit as a commodity (such as gold and silver).

Essential Qualities of Money

• Durable: People do not accept something as money if it is highly perishable and deteriorates over a short period of time.
• Transportable: If people carry large quantities of money, the goods used must have a high value relative to their weight so they can be easily moved.
• Divisible: The chosen material must be able to be subdivided into small parts with ease.
• Homogeneous: Any unit must be equal to others.
• Limited Supply: Any good must have a limited supply; otherwise, it cannot have economic value.

The Full Content of Paper Money

These were paper certificates that were covered by deposits of gold of equal value that an economy uses as issued certificates. When gold is used as money, or paper money is convertible into gold on sight, it is said that the economy follows a gold standard.

Money in the Current Financial System

The current value of money lies in the role of each individual's confidence that it will be accepted as payment by others and in its status as a governmental money-decree. The public knows that all other individuals are willing to take it in exchange for things that do have an intrinsic value. If this confidence disappeared, the banknote would be of little use. It can be said that everything considered money is normally accepted as a medium of exchange.

Modern Payment Methods

In our financial system, there are several ways to pay for goods and services:

• Checks: This transaction does not involve any exchange of currency or banknotes. The check informs the bank of its signing and the account where the money has been spent. One would say that this check does not create money but is only one way to move or relocate it.
• Credit cards: These are used to pay for the goods we buy without having to pay cash immediately. You pass the card, and it automatically sends the bill to the bank, which will actually pay; of course, the bank must be paid back the amount spent later.

Money in Modern Economies

The amount of money: The most obvious asset that should include a definition of money is cash, i.e., notes and coins that are in the hands of the public. Moreover, most shops accept personal checks we can deliver under the deposits formed in banking. Money equals legal money plus bank deposits.