Money

Classified in Economy

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Question 1: Define Money.

Money is any asset that is generally Accepted for payment for goods and services, or repayment of debt. Money is Useful because it trades for all goods and services, removes the need for Bartering making trading easier, reduces transactions costs and increases Trade. Money by definition does not expire and therefore holds value very well. It is used as a measurement tool, as all other trading goods can be valued in money terms, and money provides a common denominator of value. For theoretical Purposes money is defined as any asset which performs the functions of Money—but in actual practice, there are many financial assets which perform These functions to a greater or lesser degree and this makes it difficult to Measure empirically the magnitude of money

M1 is defined as following: M1 = Coins/currency in circulation + demand deposits + other checkable accounts + travelers Checks

Money by definition is a liquid asset That is used as a store value that does not expire and it is a measure of Relative value of goods. However, at the moment bitcoin wouldn’t fit into this Definition. Bitcoin is not liquid (it takes 4 days or more to liquidate), it Doesn’t provide a relative value of goods as if you wanted to buy a coffee today With bitcoins, the price would be $4 and almost $30 for the transaction fee, And it value expires (look at the value drop in the past 3 months, lost over 50% of its value). In the future, it could likely, fit the definition of money.

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