purchasing power of money, depends (doesnt depend) upon supply and demand. Our goods and services are sold for money, and that money is in its turn exchanged for other goods and services. The demand of money is reckonable as the quantity needed to effect business transactions. What is the primary task of the central banks all over the world? At the same time it also acts as a unit of account. But the role of money depends on the state of development of an economy. Money, the work which people undertake provides them with money. Credit is offered only when creditors believe that they have a good chance of obtaining legal tender when they present such instruments at a bank or other authorized institutions. Safeguarding monetary stability is the primary task of the central banks all over the word.
Since money pays no interest and its real purchasing power is eroded by inflation, there are almost certainly better ways to store value. These three functions of money - medium of exchange, unit of account and store of value - can only be fulfilled if there is great confidence in its stability of value. It is usually convenient to use the units in which the medium of exchange is measured as the unit of account as well. Originally, a valuable Metal (gold, silver or copper) served as a constant store of value, and even today the American dollar is technically 'backed' by, the store of gold which the US government maintains. E) It also acts as a unit of account. Thus the key feature of money is its use as a medium of exchange. In prisoner-of-war camps, cigarettes served as money. Workers exchange labour services for money.
People accept money in exchange for money. The situation in Russia nowadays reminds of that of in Germany. The supply of money is the actual amount in notes and coins available for business purposes. Money is a store of value, as part of an individual's income may be set aside for future consumption. Moreover, the central bank has the function of regulating the money supply in order to guarantee a smooth functioning of the monetary system. Banks have developed greatly from their original position as places of security for valuables. What do people accept in exchange for goods and services? But there are less expensive ways for society to produce money. The use of money any commodity generally accepted in payment for goods, services, and debts makes the trading process simpler and more efficient. In a barter economy, the seller and the buyer each must want something the other has to offer.
Fiat money is a virtual representation of goods and services that can be flexibly realized at any future.
Barter - Exchanging goods and services for other goods and services without the use of money.
Functions of Money Money as a Medium of Exchange - Anything that is generally acceptable in exchange for goods and services.
Money can be used in exchange for goods and services.