Money is the lubricant of an economy. Without money economic activities such as production, consumption, capita formation etc can not be performed. This shows that money is the life blood of an economy. Due to its quality of portability, divisibility, stability, acceptability and durability, it is regarded as the wheel of the economics’ system. Following are the role of money:
1. ON CONSUMPTION
The satisfactions can be obtained by consumption of various goods and services, which is measured by the help of money. Due to its purchasing power, people can satisfy their wants by purchasing different commodities with money.
2. ON DISTRIBUTION
Money is used in factors pricing. It is the phenomena of determining the price of factors of production, such as wage, salary, for labor, interest for capital, profit for origination and rent for land. Any producer can maximize the profit by using money.
3. ON PRODUCTION
In production entrepreneur has to compensate all factors of production for their contribution. Rent to land, wage to laborers, interest to capital, profit to enterprises has to pay and without money we can’t assess the exact compensation of factors of production.
4. CREDIT FACILITY
Money facilitates the environment of credit business in modern economy. It has made easier both lending and borrowing. Money is also used in standard of different payment.
5. MEASURING NATIONAL INCOME
National income of the country is calculated in terms of money which shows the standard of living of people. Without money measurement of national income can not be done because national income is money value of total outlay of a country within a year.
6. MONEY IN CAPITAL FORMULATION
Capital is scare and important factors of production. Money provides mobility to capital. Capital formulation is possible when there is an exact unit to measure the amount of the capita in the country. The process of the capital formulation in the modern economy is almost impossible without money.
7. SOCIAL ECONOMIC DEVELOPMENT
Money plays a signification role in social economic development. It is an effective means of mobilizing factors of production. Money facilities the development of social and physical infrastructure such as road, electricity, communication, school, hospital etc.
1. ON CONSUMPTION
The satisfactions can be obtained by consumption of various goods and services, which is measured by the help of money. Due to its purchasing power, people can satisfy their wants by purchasing different commodities with money.
2. ON DISTRIBUTION
Money is used in factors pricing. It is the phenomena of determining the price of factors of production, such as wage, salary, for labor, interest for capital, profit for origination and rent for land. Any producer can maximize the profit by using money.
3. ON PRODUCTION
In production entrepreneur has to compensate all factors of production for their contribution. Rent to land, wage to laborers, interest to capital, profit to enterprises has to pay and without money we can’t assess the exact compensation of factors of production.
4. CREDIT FACILITY
Money facilitates the environment of credit business in modern economy. It has made easier both lending and borrowing. Money is also used in standard of different payment.
5. MEASURING NATIONAL INCOME
National income of the country is calculated in terms of money which shows the standard of living of people. Without money measurement of national income can not be done because national income is money value of total outlay of a country within a year.
6. MONEY IN CAPITAL FORMULATION
Capital is scare and important factors of production. Money provides mobility to capital. Capital formulation is possible when there is an exact unit to measure the amount of the capita in the country. The process of the capital formulation in the modern economy is almost impossible without money.
7. SOCIAL ECONOMIC DEVELOPMENT
Money plays a signification role in social economic development. It is an effective means of mobilizing factors of production. Money facilities the development of social and physical infrastructure such as road, electricity, communication, school, hospital etc.
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