Thursday, February 18, 2010

Characteristics of Good Money

Characteristics of Good Money 

General Acceptability:
The good money is one which is generally acceptable by all without any hesitation. It means that anyone will be willing to readily accept it in the settlement of debt or in discharge of any obligation.
2.       Stability:
The value of money should stay stable otherwise people will confidence over it. It means mat the commodity chosen as money must not depreciate due to usage or wear and tear.
3.       Standardized:
The good money is of standardized nature and quality of its material does not undergo any great change, it must not be weak in such a m'ahner mat may leose its . original form and shape due to any mishandling or change of temperature. •-
4.       Economical:
The issuances of good money should always-be economical. ThiS' means that cost incurred on its issuance must be very low as compared to its valife. Taking a simple example we can say that issuance of one rupee note would be economical for Pakistan government if cost of printing a note is less than one rupee.
5.       Storability:
A A good niondy is one iri the shape 6ft which purchasing power can be stored for a longer period. This means that people artist be able to save the money value considerable surety that it will not lose its value.
6.       Divisibility:
A good money is capable of being divided into smaller denominations. Hence both the costly and cheap things' can be purchased from such money
7.       Transportability:
A good money, is easily transferable fomi one place to another. Paper money is the best example .of this. Not only it can be transferred easily over long distances but we also have different modes of transferring it such as cheques, pay orders, drafts, TC'c etc,
8.     ; Recognizable;.
Good money is one that can be-easily recognized by seeing or touching. It should be of such a nature that can be easily identified by anyone.. Moreover different denominations should be in different colour or size in order to avoid any confusion.
9.         Difficult to Copy:
A good money is one. very difficult to be,copied. In. other-words there should be no danger of fake issuance. There must be certain mark on it which can be easily identified by everyone and which can also be used to determine its originality
10.       Easily Meltable:
A good eurrency can be conveniently kept and stamped. Malleability is mainly a quality of metal coins. The metal coins can be melted and reproduced with new. government seals. So sucft a material that cannot be .melted is not fit for making coins. Paper currency is also malleable in a sense that it can recycled to produce new notes
11.      Elasticity:
The supply of money should remain elastic. It means that it should respond to the general needs of the economy. It must be of such a nature that its supply can be increased, or decreased to satisfy the requirements of the economy.
12.       Element of Supervision:
A good money is. one that can be effectively supervised by a central monetary authority, It is, of such .a nature mat central authority is able to keep records of the amount of money in circulation and the pattern of its distribution
13.      Scarcity:
A good money should be scarce in quantity. Its quantity in the economy should be kept low as compared to the desire for it. This implies that people witt always be working hard to*ara mow money in order to meet requirements of life.
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These are the characteristics of an ideal money. The paper currency conforms to majority &f .these standards. However the biggest drawback of our paper currency is that it is exposed to inflation due to which is losing its value over time.

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