Economics Essay: Examining the Functions and Impact of Money

This economics essay delves into the multifaceted functions of money, emphasizing its role as a medium of exchange, a store of value, and a unit of account. It highlights how money facilitates transactions and specialization by eliminating the inconveniences of the barter system. The essay also discusses how money serves as a liquid store of wealth, enabling individuals to save and defer consumption, while acknowledging the potential for greed and unethical behavior associated with the desire for wealth. Furthermore, it elucidates how money provides a common unit for measuring the value of goods and services, allowing for easier comparisons and economic calculations. The essay draws upon various sources, including Marx and Engel's observations on the impact of capitalism, biblical perspectives on the love of money, and contemporary research on the psychological effects of money priming, to provide a comprehensive understanding of money's functions and its broader implications for society.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
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Introduction
The concept of money is difficult to define in real terms. Money in common terms is
defined as anything that serves as a medium of exchange. The definition of money mostly
considers main functions of money as a starting point. Money then is defined in terms of what
money does (Keynes 2018). There are four primary functions of money – medium of exchange,
measures of value, unit of account and as a store. The essay demonstrates arguments in favors of
three of the common functions of money in reference to the three given quotes.
Medium of exchange
Use of money as a medium of exchange is the most common function of money. Use of
money came into effect in order to eliminate the inconvenience in the exchange through barter
system. Money is a more convenient means of exchange as it can differentiate the act of
purchasing from that of selling. After introduction of money, people uses money to exchange
goods and services. Money acts as a medium payment medium. Without serving as a mean of
exchange money by itself has no usefulness. Money facilitates the process of exchange. The easy
exchange results in specialization (Moor 2018). A good system of monetary framework thus has
an enormous utility in modern society. Money is often termed as an option for bearer as it offers
freedom of choice buy from those offering best deal of bargain.
As a medium of exchange money has immense importance. Followed by the first quote
of Marx and Engel from “The Communist Manifesto”, the bourgeoisie class focused on
accomplishing their self-interest. In this society people had left with no other option but to rely
on system of cash payment (Starr 2014). The dominance of bourgeoisie resulted from the higher

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control over exchange value. Everything in this society was measured in monetary term. This
shows importance of money as an exchange medium.
Store of value
Money provides a well-defined means of store of value. It stored value of a good in liquid
form. The stored money can be used to purchase commodity in future. Function of money as a
store of value was first emphasized Keynes. Storing wealth in monetary has equivalent value of
reserving liquid assets (Ball 2017). This is because money can be easily transformed into other
things. Hence, people always willing to store wealth in monetary form. It is very difficult to save
in terms of goods and services. The liquidity preference makes money as the most convenient
measure of storing wealth. Goods though have value but it cannot be reserved for a very long
period.
Storing more and more money, people become wealthier. As money can be stored as long
as people want, they have the desire to hold a large sum of money. The love and passion for
money is the root cause of evil activity in the society (Deleplace and Nell 2016). This is rightly
mentioned by Apostle Paul in Bible as the lover for money is one primary cause of all evils in
the society. The desire to become wealthier and dominate others in the society create the love for
money among people.
Unit of account
Prior to the introduction of money, it was difficult to measure value of different types of
goods as there was no common unit of such measure. After invention of money every goods and
services can be converted into the common monetary unit (Johnson 2017). Previously, different
goods are measured in different units such as cloth measured in metres, sugar in kg, milk in litres

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and such other. It was very difficult to convert all of them to a common measuring unit for the
purpose of exchange.
After money is placed as an exchange medium, people started to value everything in
monetary terms. People give far less importance on concepts like helpfulness, social contact and
other ethical values. The feeling of empathetic or compassionate has been lost. Money is used to
quantify wealth (Ball 2017). Based on this quantification people are classified as rich or poor.
The function of money as a unit of account makes physical size of money very important to the
society and its people. This argument is in line with third quote taken from Vohs.
Conclusion
Medium of exchange, store of value and unit of account are the three generalized
functions of money. Money is the most convenient medium of exchange. Every goods and
service can be converted into the common unit called money. As money can be easily converted
into liquid asset, people store wealth in forms of money.

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Reference list
Ball, R.J., 2017. Inflation and the Theory of Money. Routledge.
Deleplace, G. and Nell, E.J. eds., 2016. Money in Motion: the post-Keynesian and circulation
approaches. Springer.
Johnson, H.G., 2017. Major Issue in Monetary Economics. In Macroeconomics and Monetary
Theory (pp. 55-58). Routledge.
Keynes, J.M., 2018. The general theory of employment, interest, and money. Springer.
Moor, L., 2018. Money: communicative functions of payment and price. Consumption Markets
& Culture, 21(6), pp.574-581.
Starr, R.M. ed., 2014. General equilibrium models of monetary economies: Studies in the static
foundations of monetary theory. Academic Press.