Everyone knows that the functions of money reflect the possibilities of their use. In fact, money is the same product that is exchanged for another product, which means that they are the universal equivalent, serving the needs of their owners.
Functions of money are different. One of them is a measure of value. The labor spent on the production of any product determines its value, expressed in money, which is called the price. In order to compare the prices of different goods, you need to bring them to a single scale, that is, determine the same monetary unit for them. The price scale for metal circulation is the weight equivalent of a monetary metal accepted as a monetary unit, which serves as a measurement of the prices of various goods.
One of the most important is the function of money as a medium of circulation. In the process of direct exchange of goods, the purchase and sale coincide in time, and in this case there is no gap between them. In commodity circulation, there are two independent processes that are separated in time. Money is the mediator that allows us to bridge this gap in space and time, as well as to ensure the continuity of commodity production. One of the features of money as a medium of circulation is its actual presence, as well as the short duration of participation in the exchange process. Paper and credit money, acting as inferior (in relation to gold), can serve as a cash equivalent.
Money has another, no less important, function: they act as a means of accumulation and savings. Money provides its owner with the receipt of the desired product and, at the same time, becomes an indicator of social wealth. Each person is characterized by a desire for the accumulation of money. In the process of metal circulation, the extra money was deposited in the form of treasures, and their lack was replenished from there.
With expanded commodity production, the above feature of money is a necessary condition for the turnover of capital. Cash reserves smooth out various kinds of uneven economic life. On a national scale, there is a need to create a gold reserve, the value of which indicates the wealth of this country. This serves to ensure the confidence of residents and non-residents in relation to the national currency.
The next function of money is payment. It is characterized by one-way cash flow. With the help of money, non-cash payments are made, taxes and various fees are paid, salaries and pensions, scholarships and allowances are paid. This role has significantly increased with the development of the credit system.
The function of world money has become relevant with the development of foreign trade relations, international loans, and the provision of services to external partners. They are an international means of payment and purchasing, a universal indicator of the materialization of social wealth. Today these functions of money are often performed by freely convertible currencies (formerly noble metals).
The functions of money in the economy are diverse. With their help, price formation is carried out. They are directly related to the preparation and execution of the budget. With the participation of money is the sale of goods and services. Also using them determines the cost of production and the amount of profit. Without money it is impossible to carry out settlement and borrowing operations, operations with shares. The estimation of the volume of resources that are involved in the production process also takes place with the help of money. They arise as a result of certain conditions in economic relations and, in turn, contribute to their further development.