In different countries around the world, and at different times, a vast range of objects have been used as a medium of exchange. These have ranged from beads used by American Indians to large stone discs used by the inhabitants of Yap, a small island in the pacific ocean.
Money as we know it today, is the product of a long period of development. Man has slowly discovered, by the process of trial and error, that some objects fulfill the functions of money better than others. Characteristics like the following are important for a good money to possess.
1. Acceptability It should be acceptable everywhere.
Anything can be used as money as long as it is generally acceptable. This is why a worthless piece of paper can be used as money, for example, a 10 dollar or a 50 euro note. It is only worth this amount in spending power because everyone accepts it as such. Thus our present money is a token money - as a piece of paper it is worth much less than the face value printed upon it.
2. Durability It should be durable and long lasting.
Any commodity used as money must be hard wearing. Money will be useless if it just melted away in pocket. Coins and notes must be strong and durable so that they may act as a store of value.
3. Portable It should be of a standard size, weight
etc...
Money should be easy to carry. A house would clearly be far too heavy to move. A cow would be reluctant to go shopping with you, and even more reluctant if you tried to squeeze it into your wallet purse. Metal coins and paper notes are lightweight and fit easily into your pocket.
4. Divisibility It should be divisible, able to be divided into small numbers.
If cars were used as money, a problem would arise if you tried to buy something priced at half your car. Sawing a vehicle into half will reduce its value. One whole working car is worth much more than two halves. Therefore it must be possible to divide money of a large value into smaller values to make small purchases or to give change, without it losing value.
5. Scarcity It should be scarce, not in abundance.
Pebbles on a beach could not be used as money simply because anyone can pick them up. A shopkeeper would not exchange her goods for freely available pebbles that she could gather at any time, and in any quantity she wished. Only if money is scarce people will value it as a commodity that can be used in exchange.
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