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Home History of Money Properties/Merits of Good Money

 

Properties/Qualities/Merits of Good Money:

 

The commodity which is to serve as money should have following properties or qualities:

 

(1) General Acceptability:

 

The most important property of money is this that it should be generally acceptable. Any commodity which lacks this quality can not be accorded as money. The general acceptability can be possible if any commodity is possessing at least any one of the followings:

 

(i) Own Value of the Commodity: Gold and silver coins became the money because they were possessing their own value.

 

(ii) Legal Position: The coins and currency notes are accepted as money because they have legal backing.

 

(iii) Confidence: Cheques, drafts and credit cards are money because they are accepted on the ground of confidence.

 

(2) Divisibility:

 

The commodity which is to be money should have the quality of divisibility so that the goods in smaller quantities could be purchased. The cows and goats were not good money because they could not be subdivided into smaller parts.

 

(3) Cognizability:

 

The good money is one which could easily be cognized. If it does not happen the counterfeit currency will come into circulation. As a result, so many problems will rise.

 

(4) Transportability:

 

Being a good money a commodity should have the quality of transportability. The boats, goats and other metallic coins did not prove to be the good moneys because it was difficult to transport them. On the other hand, the credit money issued by banks, central bank or by govt. has the quality of transportability.

 

(5) Durability:

 

It is something necessary for good money that it must be durable. If any commodity gets stale; or it is perishable; or it gets infected such commodity would not be called as money. In ancient days in Rome the soldiers were given the salt as their payment. But during rain etc., it would get wet. Accordingly, it was not good money. On the other hand, the coins and paper currency are the good money because they are durable.

 

(6) Standardizability:

 

Good money is one whose all units are alike with respect to their size, quality and design etc. While the commodity which lacks such all can not be accorded as good money. As in American colonies the tobacco was used as money. But it differed in quality. Accordingly, it did not serve as good money. On the other hand the gold coins were the good money because their size and weight was same. Again, the paper currency is good money because of standardization.

 

(7) Malleability:

 

The good money is one which could easily be melted and stamped. The gold and silver coins proved to be good money as compared with iron coins because they were easy to melt.

 

(8) Stability in Value:

 

The good money is one whose value is stable. The money whose value goes on to change will not be considered as good money. As after world war I, German Mark observed a greater fall in its value, people lost confidence in it. Accordingly it did not prove to be good money.

 

Relevant Articles:

 

Barter System and its Inconvenience
Evolution of Money and Different Standards of Payments
Definition and Concept of Money
Definition of Money According to Classical Economists
Definition of Money According to Keynesian Economists
Definition of Money According to Monetarists
Representative Money or Modern Money/Plastic Money/Electronic Money
Functions of Money
Role and Importance of Money
Properties/Qualities/Merits of Good Money
Demerits of Money
Money and Near Money
 

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Rent
Wages
Interest
Profits
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money
 

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