Question

The average person thinks of the currency in her wallet or funds in her account when she thinks of the word “money,” but economists think about the concept of money in a much broader sense. What are the key features something needs to possess to be considered money, and what are some examples of things that have been used as money historically? Bitcoin and other cybercurrencies are frequently in the news now; do you think they should be considered money? Why or why not?

Answer 1

Money is defined as any form of currency which is widely accepted as a payment method in a country or across the globe. Over the years, as people and their demands grew, so did money in shape size, denomination and acceptability.

Historically, coins were used as a method of transaction and ensuring that barter system in which goods were exchanged for one another did not keep existing as it led to wide spread problems wherein people had to have similar wants to be able to exchange goods or services. Under the barter system a manufacturer of wheat, who was to purchase a shoe had to find a shoe maker who was interested in purchasing wheat.

Money helped in solving the problem, and with its very existence allowed people to store their wealth and use it as and when time demanded for this to happen. Down the line, coins are mostly avoidable and paper-based currency grew in origin. We see most transactions happen in this currency across the globe, and most countries have their own way of dealing with money. They also exchange the same with other countries at different rates depending upon its demand and supply. For example, due to the high demand of dollar globally for transactions, its exchange rate which is the rate at which it is changed with currency of foreign denomination is usually on the higher side.

Cryptocurrency, such as Bitcoin and others are widely regarded to be a great source of currency for online payments. It is important to note, that money cannot and is not restricted to physical currency only. The core sense of money is the ability of people to exchange it and to accept it as a mode of payment. Over the years, crypto currency is widely accepted as a payment method and can be regarded as money due to its exchange ability.

Please feel free to ask your doubts in the comments section if any.