In one of the articles of the Business Review of August 1957, it was written: «Money bewitches people. They fret for it, and they sweat for it. They devise most ingenious ways to get it, and most ingenuous ways to get rid of it. Money is the only commodity that is good for nothing but to be gotten rid of. It will not feed you, clothe you, shelter you, or amuse you unless you spend it or invest it. It imparts value only in parting. People will do almost anything for money, and money will do almost anything for people. Money is a captivating, circulating, masquerading puzzle».
Money. A fascinating aspect of the economy. And a crucial element of economics, Money is more than a tool for facilitating the economy's operation. When it is working properly, the monetary system is the lifeblood of the circular flows of income and expenditure which typify all economies. A well-operating monetary system helps achieve both full employment and efficient resource use. A malfunctioning monetary system can contribute to severe fluctuations in the economy's levels of output, employment, and prices and can distort the allocation of resources.
What is money? There is an appropriate saying that «money is what money does». Anything which performs the functions of money is money. So what are these functions? 1. Medium of exchange. First, and foremost, money is a medium of exchange; it is usable for buying and selling goods and services. A worker in a bakery does not want to be paid 200 bagels per week. Nor does the bakery wish to receive, say, tuna fish for its bagels. Money, however, is readily acceptable as payment. It is a social invention with which resource suppliers and producers can be paid and that can be used to buy any of the full range of items available in the marketplace. As such a medium of exchange, money allows society to escape the complications of barter. And because it provides a convenient way of exchanging goods, money allows society to gain the advantages of geographic and human specialization. 2. Unit of account. Money is also a unit of account. Society uses the monetary unit as a yardstick for measuring the relative worth of a wide variety of goods, services, and resources. Just as we measure distance in miles or kilometers, we gauge the value of goods in dollars. With a money system, we need not state the price of each product in terms of all other products for which it can be exchanged; we need not specify the price of cows in terms of corn, crayons, cigars, Chevrolets, and croissants.
