Characteristics of Money

In past people used barter system (exchange goods for goods) [Click here to visit the article on barter economy] to obtain goods and services. But with problems such as double coincidence of wants people started to use goods money such as salt, tobacco and stones. But with issues such as perishable nature people were no longer able to use goods money where they started to use gold and silver as money. But with issues such as internal value of the currency being higher than external value of it gold and silver money system too failed. Then notes and coins were introduced into the market and those notes, coins and other good money has following characteristics:


Money needs to last for a long time and should not be perished quickly. Money should have the ability to be used more than one/few times with out getting damaged or distracted. When tobacco was used as money it was perished even before the buyer reach the seller to buy goods. Modern days money is made out of paper, metal and plastics which makes money long lasting.


Money should have the ability to be carried from one place to another without a huge effort. In past people used stones as money which took effort to be transported but in modern days money is carried from one place to another with less effort where a wallet can carry any type of money including, notes, coins and debit cards.


Money should have the ability to be divided in to small units of account based on a standardized method. When people used stones and tobacco as money they were not able to divide those into small pieces in a standard form where they used it whole or divided into small pieces but it was lacking standardization. In modern days people have notes and coins from low values to high value where they are used to divide money into small units of account.


Uniformity is another major concern about money. Money has to be uniform and has to be the same wherever it is being used. In past when people used stones to perform transaction stones used in one region was different from another region where it made impossible to standardize the deal. But in modern money it it was said USD 1 note is similar wherever it is being used.

Limited in Supply

Money has to be limited in supply yo generate a value for it. If too much of money is available people will not create a value for money as everyone holds money in hand. When sand and stones were used as money people had less value for money as everyone was able to obtain sand and stones from the surroundings. Currently governments control the supply of the money to the market based on their monetary policies.


Money has to be universal and has to be accepted anywhere in the world as a universal mean for transaction. Type pf money used in foreign countries may differ but when the local money is presented in a foreign country they should be able to convert local money to the currency used in that foreign country and use. But problem which was encountered with goods money was that one region used salt as money where as another region used sand as money where a person takes sand as money to the region which used salt as money they were not able to perform the transaction sand was not accepted as money in the region which used salt as money.

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