Money, the definition of which will be discussed below, is often referred to as the language of the market, because with their help the circulation of resources and goods is carried out. Consumers purchase goods from producers, who then give cash for the resources provided to them by the population. A properly organized and well-functioning monetary system ensures the stability of national production, price stability and full employment of the population.
So what is money?
The economic definition states that
it is a measure of the value of goods. It is with the help of money that we measure and compare the cost of various services, of one or another product. But there is also such a thing as "price of money." Defining it is quite difficult. It all depends on what exactly we mean by the word "money." The fact is that this financial term is multifaceted, and it is impossible to disclose the whole meaning of this word by the one definition given above. Let's understand what money is. And what they are.
So different money. Definition M1
Neither economists nor officials agreed on the M1 components. This symbol denotes a money supply consisting of 2 elements:
1. Cash (both paper and metal), which is operated by all economic entities, except banking institutions.
2. Deposits (check deposits) in savings banks, commercial banks and other savings institutions for which you can write checks.
Thus, cash is
debt obligations of the state and its departments, and check deposits are obligations of savings institutions and commercial banks.
What is money? Definition M2
Official credit agencies have proposed a broader wording. M2 = M1 + savings accounts (nonchecked) + money market deposit accounts + time deposits (less than $ 100,000) + money market mutual funds . The main point is that all the components of the M2 category can be easily and without any loss converted into check deposits or cash.
Money: M3 definition
The third interpretation, M3, recognizes the fact that term deposits (over $ 100,000), which are usually owned by business entities in the form of certificates of deposit, can also easily be turned into check deposits. Such certificates have their own market where they can be bought or sold at any time. But it is worth remembering the risk of possible losses. Adding term deposits to the M2 category, we get a third formula for determining money: M3 = M2 + term deposits (over $ 100,000).
Reasons for the appearance of monetary units
The reasons for the appearance lie in the commodity contradiction, or rather in the contradiction between the price of the product and its consumer value:
- in terms of consumer value, absolutely all goods are quantitatively disproportionate and qualitatively heterogeneous, and also have varying degrees of utility. Pies and boots are not only not similar, but also made by representatives of various professions;
- at a price the goods are quantitatively comparable and homogeneous. Therefore, in the process of exchange, the most exotic things can be compared and equated.
Internal contradictions of the product itself are manifested only in the exchange process. And it can not be appreciated without placement on the market. The only way you can measure its price is to compare it with other products. The expression of costs for the production of goods is called exchange value, the phased development of which leads to the emergence of external polarities, the development of internal commodity contradictions and, in general, to the confrontation of money and goods.