Money And Its Functions In Modern Economy

Category: Miscellaneous

Autor: people 12 May 2011

Words: 8522 | Pages: 35

The Finance University under the Government of the Russian Federation

International Finance Faculty

Term Paper

Money and its functions in modern economy

Klyagin M.I.

Group IFF 2-2

Tutor: Olga V. Kadysheva/ Svetlana E. Tsvirko

Moscow 2010

Table of contents


CHAPTER 1. Nature of money in today’s economy 5

1.1. The concept and types of money 5

1.2. Functions of money 7

CHAPTER 2. The role of money in the modern market economy. 17

2.1 The role of money in the production process. 17

2.2. Differences in characteristics of the role of money. 22

Conclusion. 25

The list of references. 26


Money is one of the greatest inventions of a human thought. Perhaps, the whole structure of today’s economy is predetermined by the existence of money.

But when did money occur and what was the reason for its occurrence?

Money is a public institution, which increases wealth buy reducing the cost of exchange and contributing to greater specialization in occupation o, according to ones comparative advantage.

Money appeared due to trade, and since it is established that trade is one of the most ancient occupations of mankind, therefore the emergence of the monetary system can be dated back to the times of antiquity. The origin of money is associated with 7-8 thousand years BC, when primitive tribes understood that they had surplus of some goods, which could be exchanged for other needed products. Historically, as a means of exchange, human used animals, furs, stones, shells etc. So money is determined by society itself, whatever the society recognize as a mean of exchange – is money.

Money is an integral element of commodity production, which means its simultaneous development, so it can be considered that money take certain shapes at each stage of economy, which best correspond to the nature and needs of its current level. Understanding of such term as money, their role in the economy and the logic of its development comes from the knowledge of the laws of economics.

Similar to any social phenomenon, money show itself in the action – through its functions. In the course of evolution, some functions of money gradually change and transform into new, more mature and sophisticated forms. After many centuries the four following forms of many have been determined: a measure of value, a means of preserving of value, a means of exchange and a means of payment. Moreover money as a measure of value and as a mean of preserving of val...