In economics, the better your knowledge of money, the better your financial perspective will be and with that, your ability to understand how money influences the economy. This becomes important because money is the most basic tool in today’s world as it is at the center of our everyday life.
Let’s take a look at 3 important things you should know about money.
Money and wealth are not the same thing
In economics, money is essentially any acceptable medium of exchange. This basically means that anything as long as it is generally acceptable and is deemed to have value can serve as money. Keeping this in mind, having things that you can trade in exchange for goods and services does not make you wealthy, it just means you have a lot of generally acceptable mediums of exchange.
In today’s society, money is equal to credit
Today, many people spend money without even having to touch or see it. All it takes is for a financial institution to issue you with a credit card or a loan and assign a monetary value to it that you are allowed to utilize for the exchange of goods and services. This is partly the reason why literally everyone has some form of debt.
Money is a unit of account
As highlighted earlier, money is simply a medium of exchange. It is basically anything we can use in exchange forgoods and services. In modern economies, banks are the primary institutions that monitor and facilitate monetary transactions from bank payments, to credit card and debit card transactions. The fact that banks are essentially at the center of almost allmonetary transactions makes money a unit of account.
Having a better understanding of these qualities of money greatly improves our ability to utilize it.
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