The function of money as a measure of value

1.The magnitude of value of goods measured by equating them to a certain amount of money. Money serves as a universal symbol and a measure of commodity values. The basis for comparing products is a prisoner in goods abstract labor. A feature of this function is that it operates ideal money, that is mentally represented, and are not really in the hands of the commodity. Goods mentally equal to the money before the exchange.


However, the function measures the cost of carry is not some kind of symbols, and full-fledged money, that is, having self-worth. Measure the value of something so devoid of value as impossible as to measure the weight of something weightless. The cost of the goods, expressed in money, is price.

Under the gold standard, when applied only gold coins (before the First World War), the prices depend on the value of the goods as the price of gold as money is relatively constant. When paper money circulation commodity prices expressed in the signs of the cost of not having their own cost. But these people make money as a means of payment. The seller, getting them to the goods sold, convinced that he too will be able to buy them he needed goods. The state also pledged to accept paper money as payment of taxes and perform other debt obligations by citizens.

When metallic monetary circulation, and later there was a scale of prices, ie weight of the metal in the currency of the country. For example, the scale of the Soviet ruble price of the sample in 1961 was equal to 0.98741 grams of gold. Jamaican currency Conference (1976) abolished the official price of gold and the gold content of currencies of participating countries of the International Monetary Fund (IMF). In Russia, the official ratio of gold ruble and abolished in 1992. In modern conditions occurred demonetization of gold, it has lost the function of money. Gold replaced the inner and outer back of credit money.

The state determines the name of the currency denominations structure, procedure of issue of money, including coins, rules for handling cash and non-money exchange rate of the national currency to the foreign proceeding from demand. Modern money is not exchanged denominations of gold.

2. The function of money as a medium of exchange. In this function, the money should really be present. Commodity-money circulation includes purchase of goods (DT), ie transformation of money into commodity form of value, and sell (T-D), ie transformation of commodities into money. Money at the same time act as an intermediary in the exchange.

In a direct exchange of goods (T1-T2) buying and selling are the same across time and space. Commodity circulation with the use of money involves two distinct acts: sell the product and its sale. These acts are separated in time, and possibly in space. This creates the possibility of metabolic disorders. Features of the money this is the real function of the availability of money in circulation, as well as the transience of their participation in the exchange process. Therefore, this function can perform and ‘inferior’ money – paper and credit.

Some authors believe that the function of money as a medium of exchange and carry out non-cash money (when the calculations are carried out by the record sums on accounts opened in banks’ organizations). Foreign scientists usually combine the functions of money as a medium of exchange and means of payment. For Western economy is characterized byThat the majority of settlements and payments made by bank transfer. In our country the share of cash in the structure of money supply is quite high.

Businesses and organizations use the function of money as a medium of exchange in limited circumstances. They can pay cash to each other only within the state-established limit. Cash used mostly in the calculations of the population with companies and organizations and with each other when buying and selling goods in shops and markets, as well as payment of certain services.

3. Money as a means of payment. This function follows the function of money as a medium of exchange. For it is characteristic of the time lag between the movement of goods and movement of money. Goods are not always sold for cash for various reasons. Often you want the sale of goods by installments, ie, on credit. With this final act of sharing in the process of sale is paying off debt. The gap in time between the goods and money creates the danger of default of the debtor to the creditor. The problem of nonpayment has become particularly acute in. contemporary Russia. In order to expedite payments between companies using these types of credit money, such as electronic money and credit cards, bank bills. In this function can be used non-cash money (record from one account) when calculating business with each other, as well as the payment of taxes in the budget and extrabudgetary funds.

4. The function of money as a means of accumulation and savings. In this function, and money is used by enterprises and citizens. Businesses and organizations accumulate funds to finance capital construction and implementation of reconstruction and technical re-equipment, as well as for the payment of remuneration to employees on the basis of the enterprise for the year. Citizens also arises the desire for accumulation and preservation (for example, when buying apartments, villas, car, garage, etc.). However, the mere accumulation of money does not bring additional income to their owner.

In this function, the money must be real. When metallic monetary circulation extra money went into the treasure, and lack of money was replenished at the expense of treasure. In a developed market economy, the entrepreneur is unprofitable to keep their money. it to negotiate for a profit. At the same time, enterprises, organizations and the state create cash reserves to smooth out the imbalances. Gold continues to play a role as the embodiment of the treasures of the national wealth, accumulated in reserves of central banks and the treasury of the state. The value of gold reserves indicates the richness of the country and ensures the stability of the monetary unit. Individuals also accumulate in the form of gold jewelry, bullion, coins, buying it on the national currency. Companies are focusing short-term capital into banks, and long-term capital – in the form of securities to earn additional income.

5. The function of world money. Under the gold standard favored gold world money and currency of individual states, bargaining for gold (the U.S. dollar and British pound sterling). They played the role of public purchasing and tender in the world market, as well as the overall materialization of social wealth. Money is used as a global means of payment, if payments of a country exceeds receipts from other countries for the period. As the embodiment of social wealth in the world’s money is used for a loan of one country to another, with reparations the winning country defeated country (as in these cases there is a movement of the wealth of one state to another by means of money), as well as replenishing foreign reserves of the state.