ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In this case, we accept the value of the money because the government says it has value and other people value it enough to accept it as payment. For example, I accept U.S. dollars as income because I’m confident I will be able to exchange the dollars for goods and services at local stores.

Detailed explanation-2: -Money is anything accepted as payment for goods and services. For money to be a suitable means of exchange, it should be scarce, durable, portable, and divisible. Money functions as a medium of exchange, a standard of value, and a store of value.

Detailed explanation-3: -The Power of Money. Money is obviously a vital part of an economy because it allows trade to occur more efficiently. Governments have a great power that no one else in the economy has-the ability to print money. Thus, the government can acquire more goods by printing more money, a process known as seigniorage.

Detailed explanation-4: -Money allows us to meet our basic needs-to buy food and shelter and pay for healthcare. Meeting these needs is essential, and if we don’t have enough money to do so, our personal wellbeing and the wellbeing of the community as a whole suffers greatly.