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Money is described as something that can be used as a means of payment for goods and services in the market. It has several functions in modern society because it might be employed as a medium of exchange whereby an individual uses it to acquire a product or a service. In this case, the seller and the buyer should be willing to trade in the sense that what one lacks is what the other partner wants.
A medium of exchange paves the way for the assessment of the value of goods. Again, money serves as a unit of account, meaning it is a standard monetary unit that is measured in term of its value. In this case, it allows people to determine what constitutes a profit, a loss, and a liability. Money serves as a store of value, implying it plays an important role in saving what an individual does not intend to spend presently.
In this regard, the product could be retrieved in the future because what an individual has to do is simply to buy the commodity using the reserved money. Finally, money could be used as a standard of deferred payment, implying it is the only legally accepted way of settling a debt in the market.
History shows money has always been an emerging market phenomenon with the first form being in the shape of a commodity, but the modern ones are based on the fiat money. The modern type could not be having any value since it is a commodity just like any other, but it derives its value from governments declaration, as it is termed as a legal tender.
The government has to recognize the commodity within its boundaries for it to be appreciated as a means of exchange for settling all debts and acquiring products. According to the principle of finance, money has a higher value in the present as opposed to the future because it can earn interest, which makes it worthwhile. It should be noted that money gains value once the government accepts its usage within its state borders.
Before the advent of notes and coins, almost everything was utilized in trade provided the buyer, and the seller reached an agreement on the value of their goods and services. For instance, pigs could be exchanged with a few sacks of grains in what was referred to as the barter system of trade.
However, this system was unreliable, especially when the businesspersons disagreed over the exact price of their commodities. With time, metal coins were manufactured with a specific standard value that individuals could rely on when engaging in trade. In this regard, goods and services were awarded a value based on their significance.
At first, bronze and copper were widely used in daily operations, but silver coins were only utilized in acquiring expensive goods and services because they had a higher value. Even though gold coins existed, they were rarely used because they were highly valuable, apart from being fragile.
Since carrying coins was a tiresome exercise, merchants devised a new system of payment in the sense that they used vouchers whereby the holder was promised coins. Unfortunately, dishonest merchants seized the opportunity to issue vouchers that were not equivalent to what they possessed. Additionally, fraudsters could easily generate fake vouchers that resulted in great losses for the merchants.
This was the time when the government intervened by issuing paper money supported by reserves of gold and silver. Through this, merchants conducted their activities peacefully since there was stability to the paper money. The government was able to budget effectively since the chances of being bankrupt were greatly reduced, given the fact that it controlled all monetary activities in the country.
Those producing counterfeit money were easily dealt with because policies were formulated to ensure money retained its value. In modern society, technology has made it easy to carry out monetary transactions digitally.
Studies show that people are motivated to do something when they are provided with monetary rewards, which are known to raise their self-esteem. If an individual is allowed to accumulate money, the chances are high that he or she will attain the self-actualization needs as suggested by psychologists. In modern society, having more money is interpreted to mean prestige.
In this regard, powerful states globally are struggling to ensure that their currencies gain value, as they are aware that this will give them an advantage in trade activities. Based on this, the US, the UK, and China are focused on improving their currencies to attract foreign investors and improve foreign exchange. Unfortunately, money has a negative effect since it makes people forget that other things in life are equally important.
Once an individual lacks a clear source of obtaining money, the chances are high that a person will live a stressful life leading to social crimes, such as rape, drug abuse, money laundering, and smuggling of illegal weapons, which increases insecurity in the society.
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