What role does money play in economy

In countries around the world, stock exchanges are being used to help businesses raise capital and give investors opportunities to back new and established enterprises. There is no geographical limit or bias to the stock market,t which means that individuals from a diverse array of countries can use stock markets to build wealth and invest responsibility.

What role does money play in economy

Economic development is generally believed to be dependent on the growth of real factors such as capital accumulation, technological progress, and increase in quality and skills of labour force. This view does not adequately stress the role of money in the process of economic development.

It is said that money is a mere veil and intrinsically unimportant. What matters is the real goods and productive factors which money buys. However, this extreme view about the unimportance of money as such is no longer believed.

Not only is money an important factor without which modern complex economic organisation is impossible, but it is also an important factor for promoting economic development. We discuss below the importance of money in the process of economic development.

In the economy today money performs several functions. Money serves as a standard of value in which other values are measured. Money is a store of value, that is, the means in which wealth can be held. It acts as a standard for deferred payments. However, the most important function of money which distinguishes it from other goods is that it serves as a medium of exchange.

That is, money is a means of payment for goods and services. It is this use of money that distinguishes a monetary economy from a barter economy. A monetary economy is one in which goods are sold for money and money is used to buy goods.

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Money Promotes Productivity and Economic Growth: Barter system was full of difficulties of exchanging goods and services between individuals. In the absence of easy exchange of goods and services the barter system worked as an obstacle to the division of labour and specialisation among individuals which is an important factor for increasing productivity and economic growth.

Further, the process of economic growth leads to the expansion of production of goods and services and consequential rise in incomes of the people. As a result, volume of transactions in the developing economy increases. This raises the demand for money to finance the increased transactions brought about by the expanded level of economic activity.

Thus, the process of economic growth would be held in check if adequate supply of money is not forthcoming to meet the requirements of increase in the level of economic activity.

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From the viewpoint of development another important role of money lies in making the magnitude of investment independent of the current level of savings. In a barter system, the goods not consumed constitute the savings as well as investment.

The greater the current savings, the greater the investment.The role of money in a market economy Speech by Peter Praet, Member of the Executive Board of the ECB, at the Bargeldsymposium organised by the Deutsche Bundesbank, Frankfurt am Main, 10 October Ladies and Gentlemen.

This view does not adequately stress the role of money in the process of economic development. It is said that money is a mere veil and intrinsically unimportant.

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What matters is the real goods and productive factors which money buys. What role does the stock market play in a market economy? It provides businesses with money for growth in exchange for shares of ownership.

It provides the government with money in exchange for the ability to vote on upcoming bills.5/5(12). The Economy and the Role of the Government Because the United States economy is driven by perhaps the best example of a consumer-based society and a capital-driven citizenry, it is important to understand and interpret what role the US government plays in the operations of our economy.

This book is intended for a two-semester course in Economics taught out of the Compare Results · Results · Answers · Trusted AdviceService catalog: Today's Answers, Online Specials, Compare Results, Search by Category.

What role does money play in economy

Money in the modern economy Subsistence economy Everyone consumes whatever they themselves produce. A farmer would consume berries and a fisherman fish. Trade Money as an IOU If someone happens to want what someone else produces and vice versa then exchange may be possible. Money is a special kind of IOU that is universally trusted.

The farmer could exchange berries for fish with the .

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