Since money changes the form of value (money-commodity, commodity-money), they constantly balance between three entities, the first of which are individuals, the second are business entities, and the third are government bodies.
Money circulation is a movement of money occurring in cash or non-cash. The basis of this process is the division of labor in society and the level of development of production. Using the existing currency, it is possible to exchange the product of social production, as well as the provision of services and the circulation of capital.
The principle of commodity-money relations is based on the fact that they require a certain amount of financial income for circulation.
Money circulation has two priority forms of manifestation:
- Cash. This currency is used to provide goods and services, as well as to pay pensions, wages and other benefits to the population. This type of money circulation is implemented using banknotes, metal money, checks, credit cards and bills.
- Non-cash. This form is characterized by a movement of value, where cash does not directly participate. The calculation is made on the accounts of credit institutions.
Cash circulation based on cashless payments is divided into two groups. The first of them includes the payment of certain goods and services. As for the second, it includes payments to the budget (taxes), as well as extrabudgetary payments, payment of interest on a loan and repayment of a bank loan.
Note that cash and cashless circulation has a certain connection, the existence of which is natural. The fact is that money is characterized by the property of transition from one form to another. Therefore, the types of circulation make up the financial turnover of the state, united by a single currency.
There is such a thing as the law of money circulation, which was formulated by Karl Marx. Its essence lies in the fact that it establishes the amount of capital, which is a necessary condition for the fulfillment by him of the functions of a means of communication and payment.
Money circulation for proper functioning requires a certain amount of capital, which depends on several factors, for example:
- Sold goods and services
- Product price levels and tariffs.
- The speed of capital circulation, which is influenced by both general economic factors (development of production) and the structure of the payment turnover.
The amount of money in circulation is directly related to the conditions of production: if the division of labor in society is optimally developed, there is a high volume of goods sold and services provided. If labor productivity is high, the cost of goods and prices will be significantly lower. Also, the amount of money directly depends on certain conditions, for example:
- From the volume of circulating goods and services.
- From the level of prices and tariffication of services.
- From the degree of development of cashless payments.
- From the velocity of circulation of money, among which are credit.
Money circulation is characterized by a certain speed, which is determined by the number of revolutions of the monetary unit for a certain period of time. The fact is that the same currency changes hands and works to ensure that goods are sold and services are provided.
At that time, when there were gold coins in use, their number in the market was maintained spontaneously. The regulator was a treasure function that was designed to strike a balance between the goods needed for circulation and the money supply. When extra money appeared, they went into the treasure. If there was a need for them, because the quantity of goods increased, they were withdrawn from there.