Meaning of Money
Meaning of Money
What is Money?
Money has been elaborated in different ways. Some say, 'Money is that money does' (Walker). In general, anything that executes the utilities of money is the meaning of money. In the broad sense, the expression 'money' embraces all forms of exchange—silver, gold, copper, commercial bills of exchange, cheques, paper, etc. But this explanation is too extensive. Bills of exchange, cheques, receipts, etc., have been termed as representative money as they are merely suitable envoys of the standard of value. A number of individuals narrow the description down to incorporate just the commodity (e.g. silver, copper, gold) that may perform the function of money. This leaves out government currency notes or bank notes from the classification of money. These instruments can’t, reasonably talking, be debarred, for the reason that they hold all the characteristics of money, as we shall see at the moment.
The most universally approved meaning of money is that, "anything which is broadly acknowledged in imbursement for goods or for payment of other types of contracts" is money. According to this view, cheques and bills of exchange and similar other instruments of credit are not to be classed as money. For them the term credit instrument is applied, as we shall see later. The most important characteristic of money is its general acceptability. Cheques and bills of exchange are not generally acceptable, nor can their acceptance be enforced by law in discharge of obligations. Bank notes are generally accepted and are therefore, money.
Are bank deposits Money?
The individual depositors no doubt regard their bank balances as money. But, strictly speaking, so long as they lie in the bank they are not money. Only that proportion of bank deposits can be regarded as money which has been converted into circulating media and has come to be used as a medium of exchange.
However, in advanced countries, bank deposits, especially the demand deposits, are generally regarded as money, because they are readily accepted for payment as the legal tender. Therefore, in many countries demand deposits in banks are included in the definition of money supply.