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WEEK 5
TOPIC: MONEY
CONTENT:
- Meaning and Evolution of money
- Functions of money and Qualities/Characteristics of money
- Forms/Types of money.
SUB-TOPIC 1: MEANING OF MONEY AND EVOLUTION OF MONEY
Money is anything that is universally accepted as a medium of exchange and for settlement of debt. It can also be defined as anything that is generally acceptable as a means of payment. Money includes cash, bank notes, bank drafts, postal orders etc.
EVOLUTION OF MONEY
Before the advent of money, exchange took place by means of barter. This means that goods were exchanged for goods. The ancient people practiced subsistence farming that is they were able to provide for what they need. However, when the need comes for them to get what they do not have, they had to look for someone who want what they have and at the same time would give them what they want. This system of exchange was problematic and so effort was made to resolve the problem.
The solution came when items like cowries, cattle, shells, tobacco, salt and beads were used as medium of exchange. This means of exchange had his flaw because of the size and weight of the items used especially when a goat could be exchange for bags of cowries. Later, Precious Metals were weighed out whenever a payment was to be made. With time the metals were cut into pieces of definite weights and so, coins of limited face value were issued. And so, coins of limited face value were issued.
Paper money came to be as a result of the receipts issued by the goldsmiths in exchange for deposits of precious metal. The receipts became bank notes and the goldsmiths became bankers. In modern times, a further advance has been made by way of adopting paper money.
SUB-TOPIC 2: FUNCTIONS OF MONEY
- Medium of Exchange: Money can be used in exchange for goods and services because it is generally accepted. This means that money facilitate exchange.
- Standard of Deferred Payment: Since money is durable and can be stored, it can be used for settlement of debts. The use of money makes it possible for credit transactions I e goods and services can be paid for at a later date.
Unit of Account: The true worth of goods and services is measured in monetary terms. This makes accounting possible. It also makes installment payments possible
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